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| Subject: EVA Economic Value Added | Date: 3/2/2000 9:00 PM | |
| Author: jmviap | Number: 5691 of 8329 | |
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I just read "Stern Stewart's EVA" by Al Ehrbar. It looks like a management tool to incent employees to be aligned with shareholders for creating wealth for the company they work for. TO calculate EVA : Net operating profit after taxes - ((Net Working Capital + Fixed Assets) * The cost of capital). I was wondering how you find out what the cost of capital is for a corporation. I know we can find out how much their cost of debt is by looking at the bonds a company has outstanding and their rate of return, however how does one find out or calculate the cost of equity capital to then determine the cost of capital for a firm. Even if one can figure this out and find out a corporations EVA and then compare it to years previous is it a valuable index for determing the valuation of a company? Then using it as a criteria to choose a stock. Thanks to anyone who can help me out with this one! JV |
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