Edgr 451215685262188elSBN-9781337900010id 3608294338sna e hittps//ng.cae.c 5% MI
ID: 2813504 • Letter: E
Question
Edgr 451215685262188elSBN-9781337900010id 3608294338sna e hittps//ng.cae.c 5% MINDTAP Ch 03: Assignment Financial Statements, Cash Flow, and Taxes price of the firm's comman stock end therefore should not be used to evaluace management's Now, what about "Market Value Added"? Tristan During the 1990s, the consulting frm Stem, Stewart& Company developed the concept of Market Value Added, or MVA, to better assess management's performance in maximizing their sharehoiders' wealth. To achieve this, a frm's MVA is computed as the between the value and the valae of Westen GRE's shareholders equity. o, now here's a question for you: Compared to the book value, what is the advantage of the MVA as a means of evaluating management's performance? Annie well I would say thar because the market value of Westem GaE's shareholdens' equity is by the number of shares calculated by muitiphying the shares then it will fluctuate depending on how the market peroeives management's performance. A positive assessment will result in market price and MVA. Tristan Nicely donel Does this make your reading of Westem G&E's annual report easier? RCE O Type here to search 3 5 6 8 9 WER T Y
Explanation / Answer
During the 1990s, the consulting firm Stern, Stewart & Co. developed the concept of MVA, to better assess management's performance in maximizing their shareholders' wealth. To achieve this, a firm's MVA is calculated as the DIFFERENCE between MARKET value and the BOOK value of Western G&E's shareholders' equity.
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Well I should say that because the market value of Western G&E's shareholders' equity is calculated by multiplying the shares' PRICE multiplied by the number of shares OUTSTANDING then it will fluctuate depending upon how the market perceives managements' performance. A positive assessment will result in HIGHER market price and MVA
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