FINE 2000 Lecture Notes - Income Statement, Economic Value Added, Investment

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13 Feb 2013
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Market capitalization: total market value of equity, equal to share price times number of shares outstanding. The book value of equity is the sum of the funds invested by shareholders when they purchase shares plus earnings reinvested by the company on behalf of the shareholders. Market value added: market capitalization minus book value of equity: the difference between the market value of the firm"s shares, and the amount of money that shareholders have invested in the firm. Market to book ratio: ratio of market value to book value of equity: how much value has been added for each dollar that shareholders have invested. Eva: net income + after tax net finance expense (cost of capital x total capitalization: eva = nopat (cost of capital x total capitalization) Net operating profit after tax (nopat) the after tax profits from operations, as if the firm had no debt.

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