CASH VALUE ADDED
The Cash Value Added (CVA) approach is marketed by the Boston Consulting Group. The chief application of Cash Value Added is valuation with cash flow return on investment as the main measure. It shows similarities to and builds on the Cash Flow Return on Investment (CFROI®) approach from HOLT Value Associates consulting company (which was acquired by Credit Suisse First Boston last year and merged with CSFB’s online research service). Cash Value Added also can be used for periodic analysis. Yet CFROI can be objectionable. The necessary estimation of replacement costs can be problematic because the expected service life assumed for fixed assets tremendously influences the results and because the assumption of constant cash flows during the whole investment cycle seems to be unrealistic. Consequently, CFROI and Cash Value Added are less unbiased than those key measures of the other approaches.