Market Value Approach

Market value approach to value a firm is

simplest of all and can be found by using
the market value of equity and debt of the
firm at any point of time.
Value of the firm
= Market Value of Equity and Debt
= Nos. of shares x Market Price/share
+ Nos. of debentures x Market Price/
Debenture
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Chapter 10
Economic Value Added
EVA is a period-to-period computation,
which can be used to monitor the process
of value creation and record historically
the growth of the enterprise.
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Chapter 10
Computation Of EVA
The computation of EVA is a three-step
process.
1.Compute the Net Operating Profit After Tax,
called NOPAT
2.Find out WACC for the firm, and the capital
employed and
3.Find EVA as below:
EVA = NOPAT WACC x Capital Employed.

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Chapter 10
Drawbacks Of Eva
EVA is not comparable across industries due to
differing efficiencies of capital in different
industries.
Measuring EVA is not possible in respect of
projects that have not matured, for which the
full economic potential is not realised.
EVA as an absolute value. To measure growth
the ratio of EVA with capital employed will be
more appropriate.
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Chapter 10
Corporate Governance
The split between ownership and management calls
for certain measures of good corporate governance.
3-Tier governance structure in a company.
Shareholders at the top,
Board of Directors in the middle, and
management at the bottom.
Board of Directors ensures that the company
management works in the best interest of the various
stakeholders.
Company management is expected to work towards
the objectives, under the strategic direction of the
board.

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Corporate Governance
Corporate Governance refers to a set of
rules, processes, and structures to ensure
that the company affairs are run in a
transparent and accountable manner, in
the best interest of the stakeholders.

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Principles of Corporate
Governance
Transparency,
Accountability,
Protection of shareholders rights,
Involvement of stakeholders.

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Regulatory Framework For
Corporate Governance
The corporate regulatory framework focuses
upon the issues of
composition and conduct of board and its
committees;
reporting and disclosure guidelines;
grievance redressal mechanism;
norms on certification and compliance.
Sarbanes-Oxley Act (2002)
Clause 49 of the listing arrangement

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