On Decomposing Net Final Values: Eva, Sva and Shadow Project
A decomposition model of Net Final Values (NFV), named Systemic Value Added (SVA), is proposed for decision-making purposes, based on a systemic approach introduced in Magni [Magni, C. A. (2003), Bulletin of Economic Research 55(2), 149â€“176; Magni, C. A. (2004) Economic Modelling 21, 595â€“617]. The model translates the notion of excess profit giving formal expression to a counterfactual alternative available to the decision maker. Relations with other decomposition models are studied, among which Stewartâ€™s [Stewart, G.B. (1991), The Quest for Value: The EVAâ„¢ Management Guide, Harper Collins, Publishers Inc]. The index here introduced differs from Stewartâ€™s Economic Value Added (EVA) in that it rests on a different interpretation of the notion of excess profit and is formally connected with the EVA model by means of a shadow project. The SVA is formally and conceptually threefold, in that it is economic, financial, accounting-flavoured. Some results are offered, providing sufficient and necessary conditions for decomposing NFV. Relations between a projectâ€™s SVA and its shadow projectâ€™s EVA are shown, all results of Pressacco and Stucchi [Pressacco, F. and Stucchi, P. (1997), Rivista di Matematica per le Scienze Economiche e Sociali 20, 165â€“185] are proved by making use of the systemic approach and the shadow counterparts of those results are also shown. Copyright Springer 2005
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- Magni, Carlo Alberto, 2000. "Decomposition of a Certain Cash Flow Stream: Differential Systemic Value and Net Final Value," MPRA Paper 7308, University Library of Munich, Germany.
- Magni, Carlo Alberto, 2004.
"Modelling excess profit,"
Elsevier, vol. 21(3), pages 595-617, May.
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