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Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977
Textbook Problem

How are management’s actions incorporated in EVA and MVA? How are EVA and MVA interconnected?

Summary Introduction

To identify: The way to incorporate management’s actions and the interconnection between MVA and EVA.

Introduction:

Economic Value Added (EVA): It is a measure along with market value added, to evaluate management’s performance. It considers the opportunity costs of capital invested in the business and the net operating profit generated by the business.

Market Value Added (MVA): The measure to evaluate management’s performance in a company’s operations and growth, market value added considers the market value of company’s outstanding shares. It reports the market value over and above the book value of those outstanding shares.

Explanation
  • The performance of company in terms of efforts put in by management is measured by EVA and MVA.
  • It is because management’s actions are the key factor to achieve good numbers for both, economic and market value added...

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