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Theory and Decision (2005) 59: 5195 Springer 2005CARLO ALBERTO MAGNION DECOMPOSING NET FINAL VALUES: EVA, SVAAND SHADOW PROJECTABSTRACT. 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), 149176; Magni, C. A. (2004) Economic Modelling 21, 595617]. The model translates the notion of excess
prot giving formal expression to a counterfactual alternative available to
the decision maker. Relations with other decomposition models are studied, among which Stewarts [Stewart, G.B. (1991), The Quest for Value: The
EVATM Management Guide, Harper Collins, Publishers Inc]. The index here
introduced differs from Stewarts Economic Value Added (EVA) in that it
rests on a different interpretation of the notion of excess prot 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, nancial,
accounting-avoured. Some results are offered, providing sufcient and necessary conditions for decomposing NFV. Relations between a projects SVA
and its shadow projects 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, 165185] are proved by making use of the systemic
approach and the shadow counterparts of those results are also shown.KEY WORDS: decomposition, excess prot, systemic, shadow project,
EVA, SVA, Net Final ValueJEL CLASSIFICATION: C00, G00, G31INTRODUCTIONThe Net Final Value (NFV) is a well-known tool for projects
economic analysis, capital budgeting, and in general, business
and nancial decision-making. The problem of decomposing
NFV has gained in recent years a renewed interest in bothDOI 10.1007/s11238-005-8631-552 CARLO ALBERTO MAGNIAmerican and European literature, since such a decomposition gives voice, in a formal sense, to an all-pervasive notion
in economics: excess prot. Several decomposition models have
been recently developed so that the notion of excess prot seems
to be open to multiple formalizations. The importance of this
subject is both theoretical and practical. As for business and
nancial decision-making, the concept of excess prot may be
used for analysing the periodic performance of a project (or a
rm), for valuing rms, for measuring shareholders value creation, for assessing the performance of managers or business