Changes after the Restructuring:

1. Change in Corporate Governance

2. Organizational Design change
3. Change in Performance Evaluation & Rewards System
Legally, they would maintain the same structure - different companies in differe
nt geographies.
Before EVA, performance was measured by Operating profits. In emerging countries
, the operating profits would be higher. So managers were rewarded higher.
But emerging countries had higher capital cost and higher risk. This was not bei
ng taken into account.
NOPAT - does not include any cost of capital.
Capital employed = Debt + Equity
CE X WACC = value of capital invested
Investors expect value addition, on top of the value of capital invested. EVA is
a periodic performance measure. It takes the earnings post the capital charge.
Managers might not go ahead with projects which could reduce the value of the EV
A in the short run, while it could increase the share price in the long run. The
y will go ahead with short term projects and short term thinking.
EVA is not a cash flow based measure. It is susceptible to accounting gaps.
EVA value is based on scale. It is not a ratio. EVA rate is a ratio, and so it r
ewards equivalently. But larger business managers will oppose to it.
In EVA, the book value of capital is used. But it should be the market value of
equity. It is over-inflating the EVA and under inflating the capital employed.

Add EVA to project.