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Market Value Added (MVA) is the difference between the current market value of a firm and the capital contributed by investors. If MVA is positive, the firm has added value. If it is negative, the firm has destroyed value. The amount of value added needs to be greater than the firm's investors could have achieved investing in the market portfolio, adjusted for the leverage (beta coefficient) of the firm relative to the market.

Basic formula[edit]

The formula for MVA is:

 MVA = V - K  \,

where:

  • MVA is market value added
  • V is the market value of the firm, including the value of the firm's equity and debt
  • K is the capital invested in the firm

MVA is the present value of a series of EVA values. MVA is economically equivalent to the traditional NPV measure of worth for evaluating an after-tax cash flow profile of a project if the cost of capital is used for discounting.

References[edit]

  • G. Bennett Stewart III, The Quest for Value (HarperCollins, 1991).

Original courtesy of Wikipedia: http://en.wikipedia.org/wiki/Market_value_added — Please support Wikipedia.
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2 news items

 
GlobalPost
Fri, 25 Jul 2014 03:05:39 -0700

ICBC, the world's largest bank by market value, added 0.2 percent to 5.20 HK dollars. Bank of China rose 0.8 percent to 3.65 HK dollars. Bank of Communications, China's fifth biggest lender measured by assets, jumped 1.8 percent at 5.47 HK dollars.

Wall Street Journal

Wall Street Journal
Tue, 01 Jul 2014 11:30:02 -0700

Looked at another way, while the deal certainly was attractive, it is hard to square the $13 billion in extra debt-adjusted market value added since the start of last year with an incremental $500 million a year in free cash flow. That multiple of 26 ...
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