DIFFERNTIATE EVA AND MVA WITH EXAMPLES
Market Value Added = MVA
Economic Value Added = EVA
EVA examines how the use of the leverage effects of fixed costs and the (fixed) cost of capital might maximize profits.
MVA determines how the EVA analysis and what impact changes in any variable like sales or costs will have on the wealth of shareholders.
EVA example. If I had $100K to invest in rental property, I could buy one $100K property and own it free and clear. If the market rent for this property is $1000 per month, I might expect my operating overhead to cost about $500 per month which will give me a $6000 per year return on my investment.
If I use 80% leverage, I can purchase ten $50K properties for my $100K. If the market rent for each property is $800 per month, I might expect my overhead to run about $400. After debt service, my cash flow would be $160 per property, or, $19200 per year.
MVA example. Once I own the property, I might explore ways to reduce my overhead costs to increase my cash flow and ways to improve the property to add value and consequently command higher rents, the combination of which will increase the market value of my property and my net worth. Vacancy is also a fixed cost. Examining actions that reduce vacancy and the turnover rate might also increase cash flow and market value.
Just my take. I am not an accountant.