The Motley Fool Discussion Boards

Previous Page

Investors' Roundtable / Rule Maker Companies

URL:  https://boards.fool.com/eva-economic-value-added-12110088.aspx

Subject:  EVA Economic Value Added Date:  3/2/2000  9:00 PM
Author:  jmviap Number:  5691 of 8329

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
Copyright 1996-2022 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us