EVA MVA economic profit economic income

CFA Level II Corporate Finance
#1

Here is the summary pls add if u have anything else

economic profit (EP)= EVA = ebit(1-t) + wacc x total invested capital= NOPAT - wacc x total invested capital

economic inome = after tax cf - economic depr or + changes in investment value. Economic depr year t = sum of all discounted CF in project lives at year t - sum of all discounted CF in project lives at year t-1. So they can only ask economic income on a project, not a company

MVA = market value of equity + market value of debt - book value of equity- book value of debt

if its a project then MVA also = Sum of all EP discount by WACC

#2

Nice. Additionally,

  1. RI = EP = EVA

  2. RI/ V0 from RI model = Re

  3. EP/MVA = WACC

#3

RI = EP = EVA … i remember this happens when there is a special condition only…i forgot what it is tho … will check

MVA is also the NPV of the investment project.

#4

I thought EP and NOPAT are different.

#5

of cuz its different. As above: EP = NOPAT - wacc x invested cap

#6

On the top change plus sign to minus

#7

is the invested capital the capital at the beginnning of the year?

#8

Oh okay, sorry didn’t see that.