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FEVA: A Financial and Economic Approach to Valuation
Xavier Adserà and Pere Viñolas
Financial Analysts Journal
Vol. 59, No. 2 (Mar. - Apr., 2003), pp. 80-87
Published by: CFA Institute
Stable URL: http://www.jstor.org/stable/4480468
Page Count: 8
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Traditional valuation methods (economic value added, discounted cash flow, and Modigliani and Miller models) are mathematically equivalent and thus should provide the same result when the same inputs are used. They do not. Because these methods focus on different value drivers, we suggest an alternative valuation method that provides the adjustment necessary to produce consistent results. We also propose a new corporate valuation method ("financial and economic value added," or FEVA) that integrates the EVA, DCF, and MM approaches and allows a detailed analysis of financial and economic corporate value drivers.
Financial Analysts Journal © 2003 CFA Institute