6
EVA valuation of a company
Market
value
of
profitable
company
Capital
Invested
in the
company
(we can use
Book
value of Equity
if we assume
that book value
and market value
of debt
is the same)
Market
value
Added
Capital
Invested
in the
company
(or book
value of
equity)
Market
value
of
unprofitable
company
Market
Value
Lost
The value of the company =
Book value of equity + the value of future EVA
EVA2002 + EVA2003 + EVA2004 + …
(-EVA2002) + (- EVA2003)+…
(future EVA-values are discounted to present)
(1 slide)