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Understanding Wal-Mart's Market Value Add (MVA) through Economic Value Added (EVA)

This analysis explores the relationship between Wal-Mart's Market Value Added (MVA) and Economic Value Added (EVA). In 1998, Wal-Mart's MVA was estimated at $159 billion, with an EVA of approximately $1.1 billion, reflecting growth rates of 12% and discount rates of 6%. By applying the formulas for MVA and EVA, we can predict potential future values, as seen in the scenario of a 40-year outlook with no terminal value. This example serves to illustrate how MVA can be derived and interpreted using EVA metrics.

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Understanding Wal-Mart's Market Value Add (MVA) through Economic Value Added (EVA)

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  1. Wal-martReal Life Example

  2. MVA = f (EVA) M A R K E T V A L U E M V A EVA1 + EVA2 + … (1+c) (1+c)2 C A P I T A L

  3. Wal-martMVA = f(EVA) ? • In 1998 … MVA = $159 billion EVA ~ $1.1 billion

  4. 12.2% 26% 6.2% 9.2% 2.2%

  5. Wal-martMVA = f(EVA) ? • In 1998 … MVA = $159 billion EVA ~ $1.1 billion • What if … 12% EVA growth 6% Discount rate 40 years, no terminal value BINGO! NPV of EVA equals MVA

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