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Market value added (MVA) is the difference between the currentmarket value of a firm and thecapital contributed byinvestors. 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 so 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.
The formula for MVA is:
where:
MVA is the present value of a series ofEVA values. MVA is economically equivalent to the traditionalNPV measure of worth for evaluating an after-tax cash flow profile of a project if thecost of capital is used for discounting.
