This paper proposes a model aiming at decomposing the Net Final Value of a project under certainty. It makes use of a systemic outlook: The investor's net worth is regarded as a dynamic system whose structure changes over time.On this basis, a profitability index is presented, here named Systemic Value Added (SVA), which lends itself to a periodic decomposition: The periodic shares formally translate the economic concept of residual income (or excess profit). While as an overall index the Systemic Value Added coincides with the Net Final Value (NFV) of an investment, the systemic partition of a SVA is shown to differ from the Net Present Value (NPV)decomposition model proposed by Peccati (1987, 1991, 1992), which in turn bears a strong resemblance to Stewart's (1991) EVA model. The SVA model and the NFV-based model bear interesting relations: By introducing the concept ofshadow project the SVA model can be re-shaped so that the decomposition of the SVA can be accomplished by applyingPeccati's argument to the shadow project, or, which is the same, by computing the shadow project's Economic Value Added.The paper then generalizes the approach allowing for a portfolio of projects, multiple debts and multiple synchronic opportunity costs of capital, for which a tetra-dimensional decomposition iseasily obtained.

Decomposition of Net Final Values: Systemic Value Added and Residual Income / Magni, Carlo Alberto. - In: BULLETIN OF ECONOMIC RESEARCH. - ISSN 0307-3378. - STAMPA. - 55:2(2003), pp. 149-176. [10.1111/1467-8586.00167]

Decomposition of Net Final Values: Systemic Value Added and Residual Income

MAGNI, Carlo Alberto
2003-01-01

Abstract

This paper proposes a model aiming at decomposing the Net Final Value of a project under certainty. It makes use of a systemic outlook: The investor's net worth is regarded as a dynamic system whose structure changes over time.On this basis, a profitability index is presented, here named Systemic Value Added (SVA), which lends itself to a periodic decomposition: The periodic shares formally translate the economic concept of residual income (or excess profit). While as an overall index the Systemic Value Added coincides with the Net Final Value (NFV) of an investment, the systemic partition of a SVA is shown to differ from the Net Present Value (NPV)decomposition model proposed by Peccati (1987, 1991, 1992), which in turn bears a strong resemblance to Stewart's (1991) EVA model. The SVA model and the NFV-based model bear interesting relations: By introducing the concept ofshadow project the SVA model can be re-shaped so that the decomposition of the SVA can be accomplished by applyingPeccati's argument to the shadow project, or, which is the same, by computing the shadow project's Economic Value Added.The paper then generalizes the approach allowing for a portfolio of projects, multiple debts and multiple synchronic opportunity costs of capital, for which a tetra-dimensional decomposition iseasily obtained.
55
2
149
176
Decomposition of Net Final Values: Systemic Value Added and Residual Income / Magni, Carlo Alberto. - In: BULLETIN OF ECONOMIC RESEARCH. - ISSN 0307-3378. - STAMPA. - 55:2(2003), pp. 149-176. [10.1111/1467-8586.00167]
Magni, Carlo Alberto
File in questo prodotto:
File Dimensione Formato  
BOER_003.pdf

non disponibili

Descrizione: articolo
Tipologia: Versione pubblicata dall'editore
Dimensione 455.21 kB
Formato Adobe PDF
455.21 kB Adobe PDF   Visualizza/Apri   Richiedi una copia
magni454800SSRN-id1440943.pdf

Open access

Tipologia: Versione originale dell'autore proposta per la pubblicazione
Dimensione 267.38 kB
Formato Adobe PDF
267.38 kB Adobe PDF Visualizza/Apri
Pubblicazioni consigliate

Licenza Creative Commons
I metadati presenti in IRIS UNIMORE sono rilasciati con licenza Creative Commons CC0 1.0 Universal, mentre i file delle pubblicazioni sono rilasciati con licenza Attribuzione 4.0 Internazionale (CC BY 4.0), salvo diversa indicazione.
In caso di violazione di copyright, contattare Supporto Iris

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11380/454800
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 8
  • ???jsp.display-item.citation.isi??? ND
social impact