Explain why each of the following statements is generally incorrect:
a. “The firm with the highest market value is the one that has created the most value for its shareholders.”
b. “If a firm’s market value added (MVA) is positive, then its current return on invested capital (ROIC) must exceed its weighted average cost of capital (WACC).”
c. “Growth is the key to increasing a firm’s MVA.”
d. “This year’s economic value added (EVA) is positive, so the firm’s market value added must also be positive.”
e. “Giving managers a bonus related to their ability to increase the profitability (ROIC) of their business unit is one way to enhance shareholder value.”

  • CreatedMarch 27, 2015
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