EVA valuation model with changing return outperforms constant return model.
The EVA valuation model can predict a company's market value by combining its book value with expected future profits. However, this model assumes a constant required return, which is not realistic in practice. Researchers found that by adjusting the model to account for changing required returns, it can better predict market values. They compared this updated model to the original one and discovered that the new version outperformed the old one in predicting market values for different sizes of companies.