What is EVA? As a benchmark for performance measurement, EVA has been part of the toolkit for economists and managers for over 200 years. In its basic form, EVA stands for the determination of residual income or economic value added. It takes into account that the return for investors must be high enough to compensate for their risk. Residual income is zero when the operating profit is just sufficient to meet the expected return that includes the risk. This expected return corresponds to the cost of capital for both debt and equity. In contrast, the profit assessment of the accountant also determines a residual income but only subtracts an expected return for senior securities, namely the interest on debt and the dividends for preferred shares. The residual income of the accountant, also known as net income after taxes, assumes that the shareholders' equity costs nothing, meaning it is provided for free, as there is no burden on equity. Some justify this by arguing that the entire net profit belongs to the shareholders and only they can determine what constitutes an adequate return for them as owners. It becomes critical when this form of performance measurement is used, for example, to assess new investment opportunities, to make decisions about mergers and acquisitions, or when variable compensation is linked to performance. If the cost of capital is set too low, there is a high likelihood that managers will overpay for investments. The same applies to incentives.