TTK Prestige: Economic Value Added Analysis
Product Number:
9B16N062
Publication Date:
11/09/2016
Revised Date:
11/09/2016
Length:
8
pages
(5 pages of text)
Product Type:
Case (Field)
Source:
Ivey
In 2014, an analyst with a leading investment company wanted to evaluate the financial performance of a kitchen appliances company, TTK Prestige Ltd., headquartered in Bangalore, India. To accomplish this task, the analyst decided to use the economic value added (EVA)-based performance measure, which accorded importance to value creation by management for its shareholders. Recently, there had been a shift away from traditional approaches of measuring shareholder value creation (e.g., earning capitalization and present value of estimated cash flow) towards more value-added approaches like EVA, which offered a more effective method for evaluating financial performance.
Learning Objective:
This case can be used in a corporate finance course in an undergraduate or MBA program. It lends itself to a discussion of EVA methodology (including estimation of weighted average cost of capital) and its relevance. It would be particularly relevant after students have studied capital structure in a finance course. The case allows students to achieve the following objectives:
- Understand the concept and relevance of the EVA approach
- Understand the theory underlying the weighted average cost of capital and its use in the EVA approach
- Understand the nature and computation of the cost of equity including beta estimation
- Understand the concept of net operating profit after tax and its computation
- Understand the estimation of weighted average cost of capital and EVA for the target company
Issues:
Disciplines:
International,
Finance
Industries:
Other Services
Setting:
India, 2014
Intended Audience:
Undergraduate/MBA
Price:
$4.25 CAD / $4.25 USD Printed Copy
$3.75 CAD / $3.75 USD Permissions
$3.75 CAD / $3.75 USD Digital Download
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