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MVA Calculation

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Market Value Added

Business valuation:

Summary and calculation of MVA. Abstract

 

Formula

 

     

Market Value Added (MVA) = market value - invested capital.

Market Value Added (MVA) is the difference between the equity market valuation of a listed/quoted company and the sum of the adjusted book value of debt and equity invested in the company. In other words it is the sum of all capital claims held against the company; the market value of debt and the market value of equity.

 

The higher the MVA, the better.  A high MVA indicates the company has created substantial wealth for the shareholders. MVA is equivalent to the present value of all future expected EVAs. Negative MVA means that the value of the actions and investments of management is less than the value of the capital contributed to the company by the capital markets. This means that wealth or value has been destroyed.

 

Note: the aim is to maximize MVA, NOT to maximize the value of the firm, since this can be easily accomplished by investing ever-increasing amounts of capital

Note: MVA does NOT take into account the opportunity costs of the invested capital.

Note: MVA also does NOT take into account intermediate cash returns to shareholders.

Note: MVA can not be calculated at divisional (Strategic Business Unit) level and can not be used for private held companies.

 

Compare with Market Value Added: Economic Value Added  |  P/E Ratio  |  CFROI  |  EBIT  |  EBITDA  |  Cash Ratio  |  Current Ratio  |  Return on Equity  |  Fair Value  |  TSR  |  PRVit  |  Economic Margin  |  Relative Value of Growth

More valuation methodologies

Category

Financial Value

Market-based

Stock-based

 

 

 

   
 

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2016 Value Based Management.net - Last updated: Jan 6th, 2016 - All names by their owners

 

Summaries of 2,000 management methods