Vari

able
s
(MV
A vs
othe
r
vari
able
s)
EVA

Sale
s

EPS

ROI

Tata Motors

Maruti Suzuki

Mahindra & Mahindra

Regression Statistics
Regression Statistics Regression Statistics
0.1258024 Multiple R
0.789385
Multiple R
58 R Square
Multiple R
172
0.0158262
0.623128
Adjusted R Square
-0.161414063
R Square
58
R Square
95
Standard Error
Adjusted R
0.497505
Adjusted R
0.3122316 Observations
Square
266
Square
56
Standard
6.037435
49.877615
Error
572
Standard Error
11
Observation
s
5
Observations
5
Regression Statistics
Regression Statistics
Regression Statistics
Multiple R
Multiple R
Multiple R
0.600652358
R Square
R Square
R Square
0.360783255
Adjusted R Square
Adjusted R Square
Adjusted R Square
0.147711006
Standard Error
Standard Error
Standard Error
7.862853644
Observations
Observations
Observations
Regression Statistics
Regression Statistics
Regression Statistics
Multiple R
0.226809877
Multiple R
0.89953646
Multiple R
R Square
0.05144272
R Square
0.809165843
R Square
Adjusted R Square
-0.26474304
Adjusted R Square
0.745554457
Adjusted R Square
Standard Error
38.90281365
Standard Error
14354.27625
Standard Error
Observations
Observations
Observations
Regression Statistics
Regression Statistics
Regression Statistics
0.0343741
0.0909044
Multiple R
0.9124883
Multiple R
47Multiple R
55
0.8326348
0.0011815
0.0082636
R Square
R Square
82R Square
Adjusted R
0.7489523
Square
Adjusted R
0.4982276Adjusted R
0.4876045
14.618668
Square
27Square
Standard Error

10174.753
5.8076078
Standard Error
45Standard Error
Observations
Observations
Regression Statistics
Regression Statistics
Regression Statistics
0.8034430
0.0365805
0.77883052
Multiple R
Multiple R
Multiple R
0.6455208
0.0013381
0.60657699
R Square
R Square
R Square
Adjusted R
0.4682812
Adjusted R
Square
Adjusted R
0.4979927
Square
0.47543599
21.275057
Square
6.16859130
Standard Error
10173.956
Standard Error
Standard Error
Observations
Observations
Observations
The important variables that most affect the MVA have been mentioned above. (as
can be observed from the excel sheets).
Observations

ROE

It is found that more the value of R square, better the dependency on

MVA.
Data analysis is done by using Multiple Linear Regression, which is used to describe
the degree of correlation between independent variables with the dependent
variable and is expressed with varying degrees of relationship, coefficient of
determination, used to measure how big the independent variables can explain the
dependent variable.

Why EVA has high correlation with MVA in case Mahindra and Mahindra?
MVA is an absolute measure and market-to-book ratio is a relative measure. If MVA
is positive that means that market-to-book ratio is more than one. Negative MVA
means market-to-book ratio less than one. If a companys rate of return exceeds its
cost of capital, the company will sell on the stock markets with premium compared
to the original capital (has positive MVA). On the other hand, companies that have
rate of return smaller than their cost of capital sell with discount compared to the
original capital invested in company.
However, for companies with a negative EVA the association becomes less obvious,
because of the increased probability of liquidation or acquisition, which sets a lower
limit on the market value of these companies.
I think that since the principle objective is to maximize shareholder value creation,
the best way to maximize MVA is to maximize EVA.

Why EPS has high correlation with MVA in case Maruti Suzuki?
Maruti Suzuki has earned well from its revenues, which has led to higher
net income and better EPS. Better profits have led to increase in share
price and hence better market capitalisation and hence better MVA.

Why Sales has high correlation with MVA in case Maruti Suzuki?
Since better revenues lead to more profit (if variable cost is less than
50% ), which led to increase in share price and hence more demand of
shares therby increasing market cap. MVA is high.
Why ROE has high correlation with MVA in case Tata Motors and Mahindra and
Mahindra?
Though sales for Maruti Suzuki have remained higher leading to higher
profits but the book value of the company remained same whereas for the
other two companies, it fell leading to increase in value of Market Value
Added (Market Cap Book value) and Return on Equity (EPS/Book equity per share). hence
high correlation with MVA.

Conclusion: I think of alll the financial variables stated, EVA has the highest
net correlation with MVA.
By definition EVA reflects the net earnings of the organization in surplus of charge
for shareholder invested capital, on the other other hand MVA reflects how much
value the company has added to it book value.
Whether a company has positive or negative MVA depends on the level of rate of
return compared to the cost of capital. All this applies to EVA also. Thus positive EVA
means also positive MVA and vice versa. But, MVA is not a performance metric like
EVA, rather it is a wealth metric, measuring the level of value a company has
accumulated over time.
According to one mathematical relation;
Market Value Added = Present Value of All future EVA
n

MVA =

( EVA)t
k=1

1+ r