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Market value added is the difference between a company’s market value and the capital that bondholders and shareholders have contributed to it.

To calculate MVA, subtract invested capital from a company’s market value. For example, suppose ABC Company received a total of $20 million from its initial public offering and the bonds it issued when it opened for business five years ago. Today, its market value is $30 million. ABC’s MVA is $10 million.

MVA works best for companies that are publicly traded, but it can apply to private businesses, as well. It measures the value a company has accumulated. A high MVA indicates the company has created substantial wealth for shareholders and investors. If it dips into negative territory, the company’s actions and investments have diminished its value.

MVA reflects management’s performance, but the actions management takes or fails to take are not the only thing that influences a company’s share value. Market and industry development can make a stock rise or fall, as well.

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