RI = NI - equity charge RI = NOPAT - $WACC = (Operating Margin - WACC) * Total Captial = EVA = EP RI = Earnings per share - r*beginning book value per share RI = (ROE - r) * beginning book value EVA = NOPAT - $WACC = EP economic profit MVA = NPV = Sum ( EP / (1+WACC)^t) V = Bv + PV of all RI V = Bv + (ROE - r)*Bv / (r-g) <== Also single-stage RI model I am tripping now.
I thought MVA was just Equity - Invested Capital. Gives you the entire amount of residual income accumulated to date.
Yeah MVC = Market value of Debt and Equity - book value of debt equity to give you the total amount of value creation since incorporation.
And you have to discount that total amount of value created since incorporation by your wacc. to truly know what is your market value add.
What is the equation for Economic Profit again? Change in market value over the period right = PV CF at end of period - PV CF at begining + CF for the period
that is economic income. Economic profit is nopat - $ wacc.
EP is listed above, see you didn’t realize th equivalences. lol. RI = NOPAT - $WACC = (Operating Margin - WACC) * Total Captial = EVA = EP