On Decomposing Net Final Values: Eva, Sva and Shadow Project [Book Review]

Theory and Decision 59 (1):51-95 (2005)

A decomposition model of Net Final Values (NFV), named Systemic Value Added (SVA), is proposed for decision-making purposes, based on a systemic approach introduced in Magni [Magni, C. A. (2003), Bulletin of Economic Research 55(2), 149–176; Magni, C. A. (2004) Economic Modelling 21, 595–617]. The model translates the notion of excess profit giving formal expression to a counterfactual alternative available to the decision maker. Relations with other decomposition models are studied, among which Stewart’s [Stewart, G.B. (1991), The Quest for Value: The EVA™ Management Guide, Harper Collins, Publishers Inc]. The index here introduced differs from Stewart’s Economic Value Added (EVA) in that it rests on a different interpretation of the notion of excess profit and is formally connected with the EVA model by means of a shadow project. The SVA is formally and conceptually threefold, in that it is economic, financial, accounting-flavoured. Some results are offered, providing sufficient and necessary conditions for decomposing NFV. Relations between a project’s SVA and its shadow project’s EVA are shown, all results of Pressacco and Stucchi [Pressacco, F. and Stucchi, P. (1997), Rivista di Matematica per le Scienze Economiche e Sociali 20, 165–185] are proved by making use of the systemic approach and the shadow counterparts of those results are also shown
Keywords decomposition  excess profit  systemic  shadow project  EVA  SVA  Net Final Value
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DOI 10.1007/s11238-005-8631-5
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.Daniel Kahneman & Shane Frederick - 2002 - Cambridge University Press.
Judgement Under Uncertainty: Heuristics and Biases.Daniel Kahneman, Paul Slovic & Amos Tversky - 1985 - British Journal for the Philosophy of Science 36 (3):331-340.

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