S
scarlets
Member
Hi
Chapter 22 seems to describe an evolution from traditional EV all the way to MCEV.
I thought the point of EV was to get a more reliable estimate of shareholder value compared to the information in company accounts etc. which understate shareholder value.
The developments make sense until we reach MCEV, the example p21.
For a company with £100m liabs and £100m assets in equities expected to earn 8%. Under MCEV the result is £0m as per the company accounts. But I thought EV was supposed to give a truer picture than the company accounts. Clearly this company is worth more to shareholders than another company where the £100m is put into assets with expected return 7%? And so I don't see how the MCEV is an improvement.
Chapter 22 seems to describe an evolution from traditional EV all the way to MCEV.
I thought the point of EV was to get a more reliable estimate of shareholder value compared to the information in company accounts etc. which understate shareholder value.
The developments make sense until we reach MCEV, the example p21.
For a company with £100m liabs and £100m assets in equities expected to earn 8%. Under MCEV the result is £0m as per the company accounts. But I thought EV was supposed to give a truer picture than the company accounts. Clearly this company is worth more to shareholders than another company where the £100m is put into assets with expected return 7%? And so I don't see how the MCEV is an improvement.