Economic Value-Added (EVA) and Market Value-Added (MVA): Pondering Some Policy Implications

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What is economic value- added (EVA)? What is market value-added (MVA)? How do firms choose their value creation strategies? Do higher cash flows automatically result in higher economic profit? How do firms that opt for maximum economic value-added compare to firms that opt for maximum market value-added? What informs a reasonable compensation for managers based on performance metrics? These strategic policy questions relate to the profit producing capacity of a business enterprise and optimal cash flows enhancement strategies-the appropriate mix of cash inflows and outflows that maximizes net cashflows and thus the return on investment and shareholders’ wealth while minimizing the cost of operations, simultaneously.

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