mehdizaman
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- May 19, 2013
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cant really understand Economic Profit, Economic Income, MVA? anyone formulas would be nice too
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Valuation Models i.e. Corporate Financekfp22 wrote:
What are these used for? EP EI MVA
Yes, I got RI’s equity charge and EP’s $WACC mixed up earlier! It’s a weird mistake that I’ve been making. Just shows how similar they are.mehdizaman wrote:
isnt dollar wacc calculated using total capital? Wacc* total capital?
If I’m not mistaken EP and MVA are used for valuation of the firm. Whereas EI is used for valuation of projects.kfp22 wrote:
What are these used for? EP EI MVA
this is is a super good explanation… I finally understand the difference after reading this!pmond wrote:
Yes, I got RI’s equity charge and EP’s $WACC mixed up earlier! It’s a weird mistake that I’ve been making. Just shows how similar they are.mehdizaman wrote:
isnt dollar wacc calculated using total capital? Wacc* total capital?
The relationship between the two is that RI focuses on the residual income of the equity. Whereas EP is more the residual income of both the equity and the debt. That’s why you use total capital and WACC, and also that’s why we use NOPAT so interest from debt isn’t taken out like in RI.