TM

∑ (FCF/(1+Wacc)^n)+(FCF/(Wacc-g)/(1+Wacc)^n)-Debt

You do not always have enough time to run a full blown company

valuation.

1+2+3 = 6

On the occasions that you are in a hurry, you may take a quick EVA

approach.

Using free web app at

apps.mygide.uk:8123/eva

building it in the following easy seven steps in your spreadsheet.

or

1.Analyze normalized EBIT – Earnings

before interest and tax that the company can sustainably generate.

2.Take the company’s book value of equity and add interest bearing bank debt to get capital employed (or book value of company). You may adjust it by adding other operating assets and subtracting

non-operating items.

3.Calculate WACC– weighted average

cost of capital or how much the capital employed costs – take cost of equity

(expected return on equity) add cost of debt (interest rate), both weighted by its respective share in the capital employed

prior to the addition.

4.

Calculate ROCE – return on capital employed, which is a division of EBIT

over the capital employed.

5.

Subtract WACC from ROCE and multiply the result by capital employed to arrive

to EVA – economic value added.

6.

Divide EVA by WACC and add the result to capital employed to get indicative

company value.

7.

Subtract the interest bearing debt to arrive at indicative value of equity.

Indicative value of the company equity is to its book value

equal when ROCE equals WACC or simply said when

EBIT equals cost of capital

higher when the difference between ROCE and

WACC is positive

lower when the difference between ROCE and WACC

is negative.

1.2.3.

A quick EVA assessment of indicative value is very

helpful during brainstorming and ‘what next’ types of

meetings.

For an online tool to calculate EVA visit:

apps.mygide.uk:8123/eva