The Effect of Growth and Margin Improvements on Shareholder Value 
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Relative Value of Growth 
Summary of Relative Value of Growth. Abstract 
Nathaniel J. Mass (2005) 
The Relative Value of Growth (RVG) method from Mass is a technique that can be used for comparing how growth and margin improvements effect shareholder value creation. RVG expresses the value of an extra percentage point of growth as a multiple of the value of a percentage point increase in a company's operating profit margin. The higher the multiple, the more valuable growth is to a company. An RVG of 3, for example, means that a firm would generate three times as much shareholder value from adding 1% of growth than it would from increasing operating profit by 1%. Mass claims that the shareholder value creation potential of growth strategies often outweighs that of cost cutting strategies by a factor. In his article in HBR of April 2005, Mass concludes furthermore that growth is often far more valuable than managers think, especially when considering longterm.
Calculation of the Relative
Value of Growth. Formula The Relative Value of Growth model can be used for making investing decisions, corporate strategy formulation, business strategy formulation, establishing a longterm focus, show the potential of growth as a source of value, understanding shareholders expectations, performance management and executive compensation.
The main limitations of the Relative Value of Growth method are:
Compare with Relative Value of Growth: Economic Value Added  Market Value Added  CFROI  CAPM  WACC  Discounted Cash Flow  Return on Investment  EBIT  EBITDA  Growth Phases  BCG Matrix  Product Life Cycle  Product Market Grid  Profit Pools  Competitive Advantage 
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