Rafael, do you have a second to help me with my reading of Galaxy$$s annual report? I$$ve come across several unfamiliar terms, and I want to make sure that I$$m interpreting the data and management$$s comments correctly.

For example, one of the footnotes to the financial statements uses $$the book value of Galaxy$$s shares,$$ and then in another place, it uses $$Market Value Added.$$ I$$ve never encountered those terms before. Do you know what they$$re talking about?

RAFAEL: Yes, I do$.$ Let$$s see if we can make these terms make sense by talking through their meaning and their significance to investors.

The term book value has several uses. It can refer to a single asset or the company as a whole. When referring to an individual asset, such as a piece of equipment, book value refers to the asset$$s $,$ adjusted for any accumulated depreciation or amortization expense. The value, or difference between these two values, is called the asset$$s book value.

In contrast, when the term refers to the entire company, it means the total value of the company$$s as reported in the firm$$s $.$

ASHA: That makes sense. So$,$ what makes this value important to investors is that it is value that can change$$but only due to a couple of events, including the of Treasury stock, the sale of new common or preferred shares, and the payment of $.$ Equally important, it change in response to changes in the market prices of the firm$$s shares.

RAFAEL: Right! So$,$ how useful would a firm$$s book value be for assessing the performance of Galaxy$$s management?

ASHA: Well, because Galaxy$$s book value with changes in the market price of the firm$$s shares, the firm$$s book value reflect management$$s efforts to maximize the shareholder wealth and therefore be used to evaluate management$$s performance.

Now, what about $$Market Value Added$?$

RAFAEL: During the $1990$s$,$ the consulting firm Stern, Stewart & Company developed the concept of Market Value Added, or MVA, to better assess management$$s performance in maximizing their shareholders$$ wealth. To achieve this, a firm$$s MVA is computed as the between $($of$)$ the value and the value of Galaxy$$s shareholders$$ equity.

OK$,$ now here$$s a question for you: Compared to the book value, what is the advantage of the MVA as a means of evaluating management$$s performance?

ASHA: Well, I would say that because the market value of Galaxy$$s shareholders$$ equity is calculated by multiplying the shares$$ by the number of shares $,$ then it will fluctuate depending on how the market perceives management$$s performance. A positive assessment will result in market price and MVA.

RAFAEL: Nicely done! Does this make your reading of Galaxy$$s annual report easier?