On Decomposing Net Final Values: EVA, SVA and Shadow Project

Theory and Decision, Vol. 59, pp. 51-95, 2005

29 Pages Posted: 26 Dec 2008 Last revised: 15 Jun 2011

See all articles by Carlo Alberto Magni

Carlo Alberto Magni

Università degli studi di Modena e Reggio Emilia (UNIMORE) - School of Doctorate E4E (Engineering for Economics-Economics for Engineering)

Date Written: December 24, 2008

Abstract

A residual-income model, named Systemic Value Added (SVA), is proposed for decision-making purposes, based on a systemic approach introduced in Magni (2000, 2003, 2004). The model translates the notion of residual income (excess profit) giving formal expression to a counterfactual alternative available to the decision maker. Relations with other residual income models are studied, among which Stewart's Economic Value Added (EVA). The index here introduced differs from EVA in that it rests on a different interpretation of the notion of excess profit and is formally connected with the EVA model by means of a shadow project. The SVA is formally and conceptually threefold, in that it is economic, financial, accounting-flavoured. Some results are offered, providing sufficient and necessary conditions for decomposing Net Final Values. Relations between a project's SVA and its shadow project's EVA are shown, all results of Pressacco and Stucchi (1997) are proved by making use of the systemic approach and the shadow counterparts of those results are also shown.

Keywords: residual income, excess profit, net final value, decomposition, EVA, SVA, shadow project

JEL Classification: G12, G31, M41, C00, G00

Suggested Citation

Magni, Carlo Alberto, On Decomposing Net Final Values: EVA, SVA and Shadow Project (December 24, 2008). Theory and Decision, Vol. 59, pp. 51-95, 2005, Available at SSRN: https://ssrn.com/abstract=1320263

Carlo Alberto Magni (Contact Author)

Università degli studi di Modena e Reggio Emilia (UNIMORE) - School of Doctorate E4E (Engineering for Economics-Economics for Engineering) ( email )

Italy

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
200
Abstract Views
1,685
Rank
282,998
PlumX Metrics