What is the difference between eva and mva

EVA comparison amongst the firms within the industry is quite easy and possible. On the other hand, calculating EVA is relatively difficult as it requires more inputs, including the cost of capital, which is not easy to calculate. Company X has 1. MVA primarily represents the operational capabilities of a firm. Or, the success of a firm in maximizing the returns of the shareholders. MVA does not consider the opportunity costs of any alternative opportunities that a firm may come across.

On the other hand, EVA calculation includes opportunity cost in the form of the required return that investors expect. One can easily calculate the EVA for departments and product lines. This helps and adds the Management in taking various key investment decisions with regard to these departments. On the other hand, it is not possible to calculate MVA for departments and product lines.

It is calculated for the company as a whole. One way to calculate EVA is to get the net present value of all the current and future cash flows of a company.

The idea is that value is created when the return on the firm's economic capital employed is greater than the cost of that capital. EVA is net operating profit after taxes or NOPAT less a capital charge, the latter being the product of the cost of capital and the economic capital. Boundless Finance. Financial Statements, Taxes, and Cash Flow. Other Statements. Concept Version 7. The difference between these two is the MVA. The larger this figure, the greater the maximization of shareholder value.

The MVA calculation offers a summary of how well the company has maximized shareholder value since its inception. It offers a judgment on the company's past, present and future use of investment capital. A higher number is better because it shows that shareholder value has increased over the life of the company.

It is an aggregate figure because it provides information on the company as a whole. This is because figures such as market value and total investment apply to the entire firm.

To calculate the EVA, you'll need to determine the capital charges, operating profit and the net operating profit after taxes.