Application of Economic Equity Value Added (EEVA) and True Value Added (TVA) in explaining of Modern models derived from Free Cash Flow (CVFCFF and CVFCFE)

Abstract

Investors and financial managers nowadays expect through use of reliable measures to find out about real business profitability and performance. In response to this need, in recent years, financial experts, inside and outside the country, have tried a variety of performance metrics, including Cash Value Added (CVA), Created Shareholder Value (CSV), Shareholder Value Added (SVA), Residual Income (RI), Market Value Added (MVA), Economic Value Added (EVA), Adjusted Economic Value Added (AEVA), and Refined Economic Value Added (REVA), each of which conveying a different information content regarding company’s value and performance. To the same effect, the current study addresses two other economic performance indicators, namely True Value Added (TVA) and Equity Economic Value Added (EEVA), and their informational worth for CVFCFF and CVFCFE as the two new cash flow based valuation models in the automotive industry operating on Tehran Stock Exchange between 2005 and 2009. The results of the F-test performed in test of the hypotheses confirm significant association of the mentioned cash flow based evaluation models with TVA and EEVA.

Keywords: EEVA, TVA, CVFCFF, CVFCFE