In search of a better investment metric, researchers began to study Economic Value Added, or EVA, which was introduced in 1991 by Stern Stewart & Co in their book, "The Quest for Value" (Turvey, 2000). Stern Stewart & Co devised EVA as a better alternative to evaluate investment projects within the corporate finance field, later to be considered for use as a performance metric for investor use. A wide array of multinational corporations, such as Coca-Cola, Briggs and Stratton, and AT&T adopted the EVA method, which led to EVA's worldwide acclaim. Several points in the study reveal that EVA does not offer less risk, higher returns, and more adaptability for an investor. In fact, EVA underperformed the traditional portfolio performance metrics in key measurements including mean returns, and confidence intervals. EVA is a difficult performance metric to calculate, with several complex components that can be calculated in several different ways such as NOPAT, cost of equity, and cost of debt. Any information that is inaccurate or lacking can significantly impact the outcomes. Traditional performance metrics, on the other hand, such as ROA, ROE, and E/P are simple to calculate with few components, and only one way to calculate them.
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Gilkeson, James H.
Bachelor of Science in Business Administration (B.S.B.A.)
College of Business Administration
Business Administration -- Dissertations, Academic;Dissertations, Academic -- Business Administration
Length of Campus-only Access
Honors in the Major Thesis
Pataky, Tamas, "Is economic value added (eva) the best way to assemble a portfolio?" (2012). HIM 1990-2015. 1368.