The article analyses the respective advantages of Economic Value Added (EVA) and Net Present Value (NPV) for Company Value Management in terms of the Value Based Management (VBM). The author considers the methods of EVA identification and value appraisal comparison and relates EVA to NPV. The article also presents the results of the author’s empirical study of the relations between the market value of firm, return on investment and growth rate; suggests a list of pre-conditions for discounted cash flow and EVA yielding equal assessment results; presents the simulation data acquired through the imitation of the interconnection between growth rate, re-investment and return on capital being violated.
Economic value Added, EVA, Net present Value, NPV, Free cash Flow, growth rate, value management.
1. Martin, John D., Petty, J. William, VBM – upravlenie, osnovannoe na stoimosti [Value Based Management]. Dnepropetrovsk, Balans Biznes Buks Publ., 2006.
2. G. Bennett Stewart III, the Quest for Value. New York: Harper Business, 1991.
3. Damodaran Asvat, Investitsionnaia otsenka. Instrumenty i tekhnika otsenki liubykh aktivov [Investment research. Universal Tools and Techniques for Valuation of Assets]. Moscow, Alpina Biznes Buks, 2004.
4. Higgins, Robert C., Finansovyi analiz: instrument dlia priniatiia reshenii [Analysis for Financial Management], Moscow, “I.D.Williams” Publ., 2008.
5. Vélez-Pareja, Ignacio. Value creation and its measurement: a critical look at EVA. 2001. Working Paper, Social Science Research Network.
6. Fernandez, Pablo (2013). Three Residual Income Valuation Methods and Discounted Cash Flow Valuation, SSRN working paper id. 296945.
7. “Stern Stewardt&Company” website. [Electronic resource]. URL: http://sternstewart.com/. (Accessed April, 2, 2013)
8. Updated data/ Emerging Markets, Current (January 2013). [Electronic resource]. URL: http://pages.stern.nyu.edu/~adamodar/. (Accessed April, 2, 2013).
9. Spreadsheets/ Valuation Model Reconciliation/ fcffeva.xls. [Electronic resource. URL: http://pages.stern.nyu.edu/~adamodar/. (Accessed March, 3, 2013).
