whats going on with formulas?

CFA Level II
#1
  1. Residual income = NI - (re *BV0) = NI - Equity Charge
  2. Economic Profit = Residual Income
  3. Economic Profit = NOPAT - $WACC
  4. Economic Profit = EBIT (1-t) - $WACC
  5. Invested Capital = Net Working Capital + Net Fixed Capital
  6. Invested Capital = book value of long term debt + book value of equity
  7. Economic profit = EVA
  8. MVA = Market value of debt + Market value of equity - book value of debt - book value of equity
  9. MVA = Market value of debt + Market value of equity - Invested capital
  10. MVA = Enterprise Value (EV) - Invested capital
  11. MVA = NPV
  12. MVA = PV of all Economic Profit discounted at WACC
  13. Economic Income = Cash Flow - Economic Depreciation
  14. NPV = PV of residual income discounted at cost of equity

Which ones are incorrect?

#2

No 1 is consistent

No 3 and 4 are the same: NOPAT=EBIT(1-tax) , under a certain assumptions.

No 6 seems right to me. No 5 may refer to a different concept.

No 7 EVA is a trademarked method with lots of adjustments

No 8,9 and 10 are consistent

11-14: values measured must be consistent with discount rate used i.e value to equity shareholder or value to equity + creditor

Correct me if I’m wrong

#3

Am not sure about 10. Since EV = Market value of debt + Market value of equity - Cash - Investment.

#4

don’t put formulars from Equity valuation and Corporate Finance together. You’ll confuse yourself just like this…