Thevalueofthefirmobtainedbydiscountingfreecashflows
tothefirmatthecostofcapitalis$170.85,whichisidentical
to the value obtained using the economic value added
approach in the preceding table.
ILLUSTRATION 6.8: An EVA Valuation of Titan Cement
The equivalence of traditional DCF valuation and EVA
valuationcanbeillustratedforTitanCement.Webeginwith
adiscountedcashflowvaluationofTitanandsummarizethe
inputs we used in the following table:
High-Growth
Phase
Stable-Growth
Phase
Length Five years Forever after year 5
Growth inputs
Reinvestment rate 28.54% 51.93%
Return on capital 19.25% 6.57%