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Abstract:
What we use today to follow up a company's profitability and value creation is inconsistent with the capital market's mechanism, and what the market considers determines value--it is therefore imprecise and irrelevant. The accounting used will not any longer be a sufficient provider of financial information. Companies will experience a demand for more precise tools, both when it comes to metrics and the tool's ingredients (relevance) due to the increasing activity among shareholders/investors. The relevance in financial management must be dramatically improved. Companies must now identify the Value Based Management (VBM) concept that will best initiate a higher degree of Shareholder Value awareness in the company. A true VBM framework is consistent with the market's mechanism and our four factors that, according to the capital markets, determine value. The metric must be precise and relevant. Not random and irrelevant as accounting is today as a decision base.

This paper deals with the two VBM frameworks Economic Value Added (EVA?) and Cash Value Added (CVA?). Many things are being said about the two frameworks. I will in this paper present the result from my research and thinking surrounding the differences and similarities between them. The Cash Value Added framework discussed in this paper refers to the concept developed by Erik Ottosson and Fredrik Weissenrieder. The Economic Value Added framework discussed in this paper refers to the concept developed by Bennett Stewart.

Abstract:
The biases in accounting causes management to choose inappropriate investment strategies since manager is influenced by their inaccurate perception of successful and unsuccessful businesses. Management needs a model that bridges the gap between measurement of historic financial performance and investment evaluation in order to make better strategic choice. The model must measure discounted cash flow, since cash flow and time value of money determines value. Shareholders want to make money on the company's ventures and therefore have financial requirements on management's strategic decisions, i.e. strategic investments. All additional, nonstrategic outlays with the purpose of maintaining the original value of the venture should be considered as "costs". In this paper we present a new model called Cash Value Added (CVA) that introduces a relevant cash flow benchmark which will make it possible to measure historic financial performance based on discounted cash flow.

Abstract:
The purpose of this study is to contribute to the understanding of the complex phenomenon of tax effects in value and profitability analyses. The aim is to examine, describe and evaluate where and how taxes and relevant (for value) tax effects should be considered in value and profitability analysis based on discounted cash flow. This report deals with important and complicated issues:

- How should taxes be treated when dealing with value and profitability analysis of the past, today and the future?

- How do we incorporate effects from taxes into the framework of value and profitability analysis from a Value Based Management perspective?

How to properly deal with tax effects in value and profitability analysis is a difficult question. In some companies, the general opinion is that by neglecting tax effects, they are "being careful" - that they take a conservative approach. But, on the contrary, the problem is just being accelerated, which should come as no surprise. The calculation's value is often "out of control", but without the companies knowledge of it.

Whatever situation and whatever the aim of an analysis might be, it is important though to be aware of the general problems when dealing with taxes in value and profitability analysis. This report will therefore not cover the entire issue. However, it raises some important issues and presents some potential solutions.

A matrix has been developed for pedagogic reasons, the Tax/WACC matrix, displaying all possible and available combinations of tax treatment. By making your choices, you specify your preferred formula for calculating WACC, the outline in the cash flow.

WACC, investment calculation, CVA, EVA, VBM, NPV, Value Based Management

Abstract:
I have worked for many years as senior consultant and advisor for the majority of European Pulp&Paper companies, the majority of Nordic Packaging and Nuclear companies and other industries, and have found that values corresponding to billions of dollars are destroyed in the industry. Not because market assumptions etc are incorrect - that is one item that always will be uncertain - but because the industry's view on financial performance has consequences that are extremely costly to the shareholders. Examples of costly consequences are:

1. It is difficult to identify where the company should be expanding and where it should improve the current business. The company does not grasp the expansion opportunities it has.

2. The renewal of the business is too slow, low propensity for renewal.

3. Low performance is cemented The reason for this money-wasting is profitability information based on accounting.

profitability, EVA, CVA, NPV, investments, decisions, allocation, capital