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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 Market Value Added (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: Market Value Added (MVA) can not be calculated at divisional
(Strategic Business Unit) level and can not be used for private held
companies.
Compare also:
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
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