The Relationship between Cost of Capital and the Criteria Related to Economic Value Added, including Economic Value Added (EVA), Refined EVA (REVA) Market Value Added (MVA) with Intrinsic Value of Firm in the Active Listed Companies of The Tehran Stock Exchange (TSE)
Journal of Securities Exchanges,Volume 4, Issue 13, Summer 2011, Page 41-57
Posted: 9 Oct 2019 Last revised: 17 Apr 2020
Date Written: 2011
One of the latest firm performance assessment measures is economic value added. Based on this measure, firm value depends on two factors: capital return and cost of capital. This research studies the correlation between criteria's related to economic value added (EVA, REVA, MVA) with the intrinsic value of companies and comparison with the correlation between the other variable (cost of capital) with the intrinsic value of companies listed in Tehran Stock Exchange. and specify the criterion related to economic value added (EVA, REVA, MVA) which can be appropriate to evaluate company performance and has more correlation with the intrinsic value of companies? In order to answer this question 110 year – company data are selected from the active companies listed in Tehran Stock Exchange and statistical analysis was done. The results indicate that there are significant relationships between economic value added and market value added with the intrinsic value of company. So market value added has a stronger relationship with the intrinsic value of the company among these three criteria.
Keywords: Cost of capital; Criteria Related to Economic Value Added; Intrinsic Value of Firm
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