RI Recap beginning, economic, charge, equity, profit

dvilayphet

RI = NI - equity charge
RI = NOPAT - $WACC = (Operating Margin - WACC) * Total Captial = EVA = EP
RI = Earnings per share - r*beginning book value per share
RI = (ROE - r) * beginning book value
EVA = NOPAT - $WACC = EP economic profit
MVA = NPV = Sum ( EP / (1+WACC)^t)
V = Bv + PV of all RI
V = Bv + (ROE - r)*Bv / (r-g) <== Also single-stage RI model


I am tripping now.



Edited 1 time(s). Last edit at Wednesday, June 1, 2011 at 09:33PM by pepp.

ningning1984

I thought MVA was just Equity - Invested Capital. Gives you the entire amount of residual income accumulated to date.

random_walker47

Yeah MVC = Market value of Debt and Equity - book value of debt equity to give you the total amount of value creation since incorporation.

RepoToronto

What is the equation for Economic Profit again? Change in market value over the period right

= PV CF at end of period - PV CF at begining + CF for the period

Rasec

that is economic income. Economic profit is nopat - $ wacc.

OmarAdnan

EP is listed above, see you didn't realize th equivalences. lol.

RI = NOPAT - $WACC = (Operating Margin - WACC) * Total Captial = EVA = EP