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Market Value Added

Market Value Added (MVA) is a calculation that measures the difference between a firm's current market value and the capital contributed by investors. A positive MVA means the firm has added value, while a negative MVA means it has destroyed value. MVA is economically equivalent to net present value and considers the time value of money by discounting future economic value added amounts using the firm's cost of capital. Economic Value Added (EVA) is a measure of financial performance calculated as a firm's operating profit after taxes minus the cost of capital employed.

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434 views

Market Value Added

Market Value Added (MVA) is a calculation that measures the difference between a firm's current market value and the capital contributed by investors. A positive MVA means the firm has added value, while a negative MVA means it has destroyed value. MVA is economically equivalent to net present value and considers the time value of money by discounting future economic value added amounts using the firm's cost of capital. Economic Value Added (EVA) is a measure of financial performance calculated as a firm's operating profit after taxes minus the cost of capital employed.

Uploaded by

Karan Tyagi
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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Market Value Added (MVA) is the difference between the current market value of a firm and the capital

contributed by investors. If MVA is positive, the firm has added value. If it is negative, the firm has destroyed value. The amount of value added needs to be greater than the firm's investors could have achieved investing in the market portfolio, adjusted for the leverage (beta coefficient) of the firm relative to the market. The formula for MVA is:

where: MVA is market value added V is the market value of the firm, including the value of the firm's equity and debt K is the capital invested in the firm

MVA is the present value of a series of EVA values. MVA is economically equivalent to the traditional NPV measure of worth for evaluating an after-tax cash flow profile of a project if the cost of capital is used for discounting. What Does Market Value Added - MVA Mean? A calculation that shows the difference between the market value of a company and the capital contributed by investors (both bondholders and shareholders). In other words, it is the sum of all capital claims held against the company plus the market value of debt and equity. Calculated as:

What Does Economic Value Added - EVA Mean? A measure of a company's financial performance based on the residual wealth calculated by deducting cost of capital from its operating profit (adjusted for taxes on a cash basis). (Also referred to as "economic profit".) The formula for calculating EVA is as follows: = Net Operating Profit After Taxes (NOPAT) - (Capital * Cost of Capital)

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