The Model of Performance and Market (MPM), results from the combination
of the ICV and DiffMtoB models, as follows:
MPM=a*[Performance]+b*[Market], with (a+b)=1
Or
MPM=a*[ICV]+b*[DifMtoB], with (a+b)=1
Where:
DifMtoB = [(SB1+SB2+SB3)/3 -
(BV1+BV2+BV3)/3]
with
SB1=Stock
Capitalization for year #1
SB2= Stock
Capitalization for year #2
SB3= Stock
Capitalization for year #3
BV1= Book Value for
year #1
BV2= Book Value for
year #2
BV3= Book Value for
year #3
VIC= {[(TAM*ROAI) – TAM*ROAE]*(1 – TMI)}/Cr
with:
TAM=(A1+A2+A3)/3
A1=Total of Assets for year #1
A2= Total of Assets
for year #2
A3= Total of Assets
for year #3
RBT=(R1+R2+R3)/3
R1=Income before taxes for year #1
R2= Income before taxes for year #2
R3= Income before
taxes for year #3
ROAC=RBT/TAM
ROAI=(Σai/Σri)
ai=Total of assets for
company i of industry k
ri=Results before
taxes for company i of industry k
TMI =
(I1+I2+I3)/3 / (R1+R2+R3)/3
R1= Income before taxes for year #1
R2= Income before taxes for year #2
R3= Income before
taxes for year #3
Cr = Capitalization rate(1)
a and b are the variables that combine
ICV and DiffMtoB
(1) This rate is an important element that contributes
to the result of the model; therefore it must carefully be fixed. The ideal
would be to get a rate for each company, but because it is very complicated, we
must find a rate to each industry. We should remember that Ta=r0+βi(rm-r0) where
r0 is the rate
of remuneration of the capital without risk of danger; rm is the rate of remuneration in the market; and βi the
level of risk of the industry in cause. In this measure, the future value of
the company will have to vary according to the risk of industry.