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.

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

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

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.

ningning1984

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