New model reveals hidden profits in investments, changing financial game.
The article presents a model that breaks down the value of a project into smaller parts. It looks at how an investor's wealth changes over time and introduces a new measure called Systemic Value Added (SVA). This SVA can be split into different components, similar to the idea of making extra profit. The model shows that SVA is the same as the Net Final Value of an investment, but the way it is divided is different from previous models. By considering a "shadow project," the SVA can be broken down further. The model can also be applied to a group of projects, multiple debts, and different costs of capital, leading to a detailed breakdown of value.