Economic Value Added Model - 1584 Words

Nà RODNà  BANKA SLOVENSKA USING OF THE ECONOMIC VALUE ADDED MODEL FOR VALUATION OF A COMPANY Doc. Ing. Eva Kislingerovà ¡, CSc. Prague University of Economics Introduction There is possibility to use, with respect to the object of valuation, several methods for valuation of a company in practice. One of the most important and highly used group of methods are yield methods. They are usually called Discounted Cash Flows (DCF) methods. Value of a company is derived from present value of future incomes connected with the ownership of a company. The core of these models is working with time value of future incomes investor gets in case of realization of an investment. There are several possibilities to work with future incomes in DCF†¦show more content†¦This is a basic idea of new measure – EVA. It was first published by Shawn Tully in the Fortune magazine in an article „The Real Key to Creating Wealthâ€Å". The broad publicity and success of EVA is result of work of a consulting company Stern Stewart management Services. 38 BIATEC, roà £nà ­k 8, 11/2000 Nà RODNà  BANKA SLOVENSKA Figure 1 Definition of Weighted Average Cost of Capital (WACC) Interest for external capital provided re Risk-free rate rf ÃŽ ² Stock beta re = rf + ÃŽ ²(rm – rf) (rm – rf) Risk market premium RMP (E = Equity) vide value of equity by number of shares we get value of a share, too. Sample Entering data: set the value of ALFA, Ltd. to the Dec. 31, 1998 if you know following data: a) Information from the balance sheet: Debt (D) Equity (E) Long Term Invested Capital (C) 55 mil. Kà £ ⇒ D/C = 0.29 134 mil. Kà £ ⇒ E/C = 0.71 189 mil. Kà £ ⇒ ÃŽ £ = 1.00 15 % 35 % 15(1 – 0.35) = 9.75 % b) After – Tax Debt Cost Income Tax Rate t D = Debt Cost of External Capital rd Income Tax Rate (t)x100 Effective Cost of Debt rd c) Cost of Internal Capital Weighted Average Cost of Capital D E WACC = rd(1 – t) –– + re –– C C Cost of Internal Capital re (CAPM2 model) 18.,42% = 10.5 + (1.1 xShow MoreRelatedThe Product Of Apple Inc.1550 Words   |  7 PagesMarket Value Added – (MVA) A calculation that shows how much the shareholders value has been added within the company as its calculated by having the difference between the market value of the company and the capital contributed by the shareholders within the company. As it does have a great company role on showing how the company has used the investment capital since when the company started to the present, and that data can be used for future prediction of the company. 4. 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