During the $1990$s$,$ the consulting firm Stern, Stewart & Company developed the concept of Market Value Added, or MVA, to better assess management$$s performance in maximizing their shareholders$$ wealth. To achieve this, a firm$$s MVA is computed as thedifference between $($of$)$ themarket value and thebook value of Extensive$$s shareholders$$ equity.

OK$,$ now here$$s a question for you: Compared to the book value, what is the advantage of the MVA as a means of evaluating management$$s performance?

MADISON: Well, I would say that because the market value of Extensive$$s shareholders$$ equity is calculated by multiplying the shares$$market price by the number of sharesoutstanding $,$ then it will fluctuate depending on how the market perceives management$$s performance. A negative assessment will result ina decreased market price and MVA.