MVA

MVA measures the value of the company as a result of its existence and operation in the market.

MVA = market value – total amount invested

Market value - current value of the company

Capital - the funds invested by the shareholders and long-term debt holders.

It represents the increase in the value above the level of capital invested.

However, it does not consider any loans raised by the company.

The effects of dividend payments on shareholder wealth

When a company pays a dividend, market value and equity are reduced by the same amount. The…