Economic Value Measurement: Investment Recovery and Value Added - Irva

Abstract

In Velez-Pareja, (1999b and 1999c), some difficulties of EVA as an approach for the measurement of economic added value were considered. In those papers, the use of real economic value added based on the real free cash flow was suggested. This means the real cash flow calculated from the immediately previous period. In Velez-Pareja (1999a and 2000), a methodology was presented to determine and to construct the free cash flow of a firm. The present article studies based on the previous works, an indicator of value added derived from the real free cash flow.

Keywords: Free cash flow, firm evaluation, firm valuation, investment valuation, Net Present Value (NPV), Economic Value Added (EVA)

JEL Classification: G12, G31, J33, M40, M41, M46