Final answer:
The investment competition is a contest where participants make hypothetical investments and compete against each other to achieve the highest returns. EVA (Economic Value Added) is a measure used to evaluate investment performance, taking into account the cost of capital. It helps assess the true economic value generated by an investment.
Step-by-step explanation:
The investment competition refers to a contest where participants make hypothetical investments and compete against each other to achieve the highest returns. It is often organized by schools or financial institutions to help students learn about investing and finance.
One concept that can be used to evaluate investment performance is EVA, which stands for Economic Value Added. EVA is a measure of how much value a company is creating for its shareholders, taking into account the cost of capital.
For example, let's say two students participate in an investment competition. Student A achieves a higher return on their investment but had a higher cost of capital, resulting in a lower EVA. Student B may have a lower return but a lower cost of capital, resulting in a higher EVA. So, just looking at returns alone may not provide a complete picture of investment success. EVA helps to assess the true economic value generated by an investment.