Bruce Wasserstein, Past Chairman & CEO of Lazard

The chief difference between DCF and Economic Value Added® is one of presentation and focus. By highlighting the fact the capital has a cost, Economic Value Added® spotlights the importance of capital budgeting decisions. Economic Value Added® also provides a transparent year-by-year tally of company performance. DCF, on the other hand, obscures the underlying economic value trend by treating a dollar of free cash flow the same whether it merely covers the cost of prior capital investments or actually provides a return above the cost of capital. This latest version of management science is helpful because it highlights the tendency in DCF models to deemphasize the need for future capital expenditures and reap the benefits created from old ones.