The pitfalls of EVA

• Although EVA is a value based measure, and it gives in valutions exactly same answer as discounted cash flow, the periodic EVA values still have some accounting distortions
• That is because EVA is after all an accounting-based concept, suffering from the same problems of accounting rate of returns (ROI etc.). In other words the historical asset values that distort ROI do distort also EVA values
• The equivalence with EVA and the cash flow based investment and valuation tools NPV and DCF is due to the fact that in valuations the problematic historical asset values (book value) are irrelevant (cancel out) and only the cash flows are left to give the end result

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