2005Journal of Anhui Business College of Vocational TechnologyRequires access

On EVA Valuation Approach

Yang Chong-huai

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Abstract

EVA is not only an important indicator prevailing abroad recently for evaluating operational situation and managerial level of enterprises, but also can be introduced into value appraisal of enterprises. This paper discusses the basic principal of EVA valuation approach and sets up relevant valuation model. Compared with discounted free cash flow method that enterprises use currently, EVA valuation approach has double advantages, that is, it is not only relevant to enterprise value but also useful in calculating and checking the actual value effect.

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What this paper is about

EVA is not only an important indicator prevailing abroad recently for evaluating operational situation and managerial level of enterprises, but also can be introduced into value appraisal of enterprises. This paper discusses the basic principal of EVA valuation approach and sets up relevant valuation model. Compared with discounted free cash flow method that enterprises use currently, EVA valuation approach has double advantages, that is, it is not only relevant to enterprise value but also useful in calculating and checking the actual value effect.

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Available abstract

EVA is not only an important indicator prevailing abroad recently for evaluating operational situation and managerial level of enterprises, but also can be introduced into value appraisal of enterprises. This paper discusses the basic principal of EVA valuation approach and sets up relevant valuation model. Compared with discounted free cash flow method that enterprises use currently, EVA valuation approach has double advantages, that is, it is not only relevant to enterprise value but also useful in calculating and checking the actual value effect.

Key concepts: Valuation (finance), Free cash flow, Discounted cash flow, Economic Value Added, Cash flow, Income approach, Business valuation, Computer science

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