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Explanations of EVA, MVA and NPV and
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Explanations of EVA, MVA and NPV and their relationship with each other The concept of EVA is a measure of economic profit and was popularised and originally trade-marked by Stern Stewart Consulting Company in the 1980's. Economic Value Added (EVA) can be defined as the difference between net operating profit after taxes and the monetary value of a company's total cost of capital. Should a company's profit exceed the overall costs of funds they create EVA. It can be so important because EVA is the most efficient internal measure of the true economic profit of a company. Managers within any company can use this measure in order to obtain any crucial information they may need when making crucial decisions. When broken up EVA can simply be defined as an estimate of the amount by which earnings exceed or fall short of the required lowest rate of return that shareholders could receive...
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