Difference between EVA and MVA

CFA Level II
#1

Can any one explain the difference between EVA and MVA ? Thanks

#2

EVA - is relevant for a given year/period i.e. - it is based on the NI for that period - the $WACC for that period MVA - is the PV of EVA’s in the future, that gives you the value of the stock. I’ve seen other things being referred to as MVA’s - for example the market value of debt & equity - invested capital. I think in theory it is supposed to come to the same “value”, but I’m not sure about this part

#3

mva is the npv of economic profit discounted by the wacc. eva=economic profit= nopat x $wacc.

#4

serf_dude Thanks.

#5

cfasf1 Wrote: ------------------------------------------------------- > mva is the npv of economic profit discounted by > the wacc. > > eva=economic profit= nopat x $wacc. Should be NOPAT - $WACC :wink:

#6

MVA = enterprise value net of working capital

#7

MVA= mkt value- invested capital

#8

market value of what? enterprise value?

#9

MVA is basically the market value added of the firm (debt + equity) and the invested capital IC= equity+ long term debt) Look you have to make things equal here, there are debt and equity component in IC, so the MV should be the MV of the whole firm, not just equity.

#10

residual income= Ni - equity charge (value added to firm in a year) eva= nopat -WACC$ (again value added in a year) mva= market value - invested capital (value added since inception)

#11

Then Economic Income = Cash Flow - Economic Depreciation Where Economic Depreciation is the change in the NPV of the project. Do I have that right?

#12

yes

#13

wheres the MVA explanation in schweser?

#14

MVA=EVA/WACC

#15

zimzim78 Wrote: ------------------------------------------------------- > cfasf1 Wrote: > -------------------------------------------------- > ----- > > mva is the npv of economic profit discounted > by > > the wacc. > > > > eva=economic profit= nopat x $wacc. > > > Should be NOPAT - $WACC :wink: oops. good catch.

#16

Whats the difference between EVA spread and CFROI Spread?

#17

CFAdummy , by CFROI spead, you mean the spread btw CFROI and WACC, right? Either positive EVA spread or positive CFROI spread indicate economic profits and value creation. the only difference I can come up with is the difference btw CFROI and EVA :frowning: anyone has other explanations?