EVA - Valor Econômico Agregado (VEA) - WACC - Custo Médio Ponderado de Capital - CMPC

Summary

This video explains the concept of Economic Value Added (EVA), a key indicator to measure whether a company is generating value for its shareholders. It highlights the relationship between EVA and the Weighted Average Cost of Capital (WACC), demonstrating how to calculate both using a company's financial data. The video includes a practical example where a company's profitability is analyzed to see if it exceeds the required return on investments, adding value beyond expectations. The overall message is that EVA helps determine whether a company’s profits truly benefit its investors.

Takeaways

• 😀 EVA (Economic Value Added) measures whether a company's return exceeds the required return by shareholders, indicating whether the company creates value beyond alternative investments.
• 😀 A positive EVA means the company has created value for its shareholders by exceeding their expected returns.
• 😀 A negative EVA suggests the company failed to meet shareholder expectations, even if it made a profit.
• 😀 EVA is calculated by subtracting the required return (based on the company’s cost of capital) from the company’s actual profit.
• 😀 The Weighted Average Cost of Capital (WACC) is used to determine the minimum return a company must generate to satisfy both debt holders and equity investors.
• 😀 WACC takes into account the cost of debt and the cost of equity, weighted by their respective proportions in the company’s capital structure.
• 😀 In the example, the company’s WACC is calculated as 13.32%, meaning the company needs to generate at least this return to meet its financial obligations.
• 😀 If a company’s actual profit exceeds the calculated minimum required return (WACC), it creates value for shareholders, which is reflected in a positive EVA.
• 😀 EVA is a useful metric for shareholders to assess whether their investment is yielding more than it would have in alternative, less risky investments.
• 😀 EVA can be calculated by subtracting the minimum expected profit (based on WACC) from the company’s actual profit, indicating the additional value generated for shareholders.
• 😀 If a company’s profit is less than the required return (as calculated by WACC), the company has not created value, even if it shows a positive net income.

Q & A

What is EVA (Economic Value Added) and why is it important?

EVA is a measure of a company's financial performance that calculates the value added to shareholders after covering all costs, including the cost of capital. It is important because it helps assess whether a company's return exceeds the minimum required return for its shareholders and creditors.

How does EVA differ from regular profit metrics?

Unlike regular profit metrics, EVA takes into account not only the revenue and expenses of the business but also the cost of capital. It subtracts the minimum required return from the actual profit to determine if the company has truly created value for its shareholders.

What role does the WACC (Weighted Average Cost of Capital) play in calculating EVA?

WACC represents the minimum required return a company must earn to satisfy both its creditors and shareholders. It is used in the EVA calculation to determine the threshold that the company must exceed to create value. If the company’s return is greater than WACC, EVA is positive, indicating value creation.

How is the WACC calculated?

WACC is calculated by multiplying the cost of debt (k_d) by the proportion of debt in the capital structure, and the cost of equity (k_e) by the proportion of equity. These two values are then added together to give the weighted average cost of capital.

What happens if the company's return is lower than the WACC?

If the company’s return is lower than the WACC, it means the company has not generated enough profit to cover the costs of capital. As a result, the EVA will be negative, signaling that the company is destroying value rather than creating it.

What does it mean if the EVA is positive?

A positive EVA indicates that the company has generated more return than the required minimum return based on its cost of capital. This means the company has added value to its shareholders and exceeded the expected return.

What factors are considered when calculating the capital structure for WACC?

The capital structure for WACC considers the proportions of debt (third-party capital) and equity (shareholders' capital) in the company. The cost of debt and the expected return on equity are key components in calculating the overall WACC.

How do investors use EVA to make investment decisions?

Investors use EVA to assess whether a company is delivering a return greater than other investment alternatives in the market. A positive EVA signals that the company is generating value beyond the cost of capital, making it a potentially attractive investment.

In the example, how is the EVA calculated with a profit of 10,230?

In the example, the calculated value limit (based on the WACC of 13.32%) is 8,260. The EVA is calculated by subtracting this value limit from the company's profit after taxes. So, for a profit of 10,230, the EVA would be 10,230 - 8,260 = 1,970.

What does a negative EVA imply about the company’s performance?

A negative EVA implies that the company has not generated enough return to cover the cost of capital. Even though the company might be profitable, it is not creating value for shareholders, and could have been better off investing in other alternatives.