With this MVA calculator, you will be able to calculate the value a company is creating for its shareholders.
We have written this article to help you understand what MVA is and how to calculate MVA in finance using the market value added formula. We will also demonstrate some examples to help you understand the calculation. Please check out our economic value added calculator for further information.
What is market value added (MVA)?
Market value added (MVA) is a financial metric that calculates the difference between the total market value of a company and the amount of capital that has been invested in the company over time. The concept of MVA is based on the idea that the ultimate goal of any company is to create value for its shareholders, and that value can be measured by the market value of the company's stock.
MVA is a powerful tool for investors, managers, and analysts who want to evaluate a company's performance and its ability to create value for shareholders. A positive MVA indicates that a company is creating value for its shareholders, while a negative MVA indicates that the company is destroying value.
How to calculate MVA in finance
To understand how to calculate MVA in finance, let's take Company Alpha as an example:
- Company name: Company Alpha
- Current market value: $1,000,000
- Capital invested: $700,000
- Current stock price: $20
- Number of shares outstanding: 50,000
Calculating MVA requires three steps:
Compute the current market value of the company
First, you need to calculate the company's market value, which is the total value of the company's outstanding shares. This can be calculated by multiplying the current stock price by the number of outstanding shares.
You can check out our market capitalization calculator to understand more about this topic.
current market valueis
$20 × 50,000 = $1,000,000.
Determine the capital invested
The second step is to calculate the total capital invested in the company over time. This includes the initial capital investment plus any additional investments made by shareholders.
capital investedin this company is
You can also use our ROIC calculator to understand more about this topic.
Calculate the MVA
The last step is to calculate the market value added (MVA) using the market value added formula:
MVA = current market value - capital invested
MVAof Company Alpha is
$1,000,000 - $700,000 = $300,000.
Can market value added (MVA) be negative?
Yes, the market value added can be negative. A negative MVA means the asset has dropped in value since you invested in it.
How can I calculate the MVA of a company?
You can calculate MVA in three steps:
Compute the current market value of the company.
Determine the capital invested.
Apply the MVA formula:
MVA = current market value - capital invested.
What are market value added and economic value added?
Market value added and economic value added are both measures of a company's ability to create shareholder value. MVA measures the difference between the company's market value and the capital invested, while EVA considers the cost of capital and measures residual income.
What is the significance of a negative MVA for a company?
A negative MVA indicates that the company is destroying value for its shareholders, meaning that the market value of the company is lower than the total amount of capital invested in the company.
What is the MVA if the current market value is $200 and the capital invested $150?
MVA will be
$50. You can calculate this by subtracting the
capital invested from the
current market value.