Infosys Technology Case

Infosys Technology is the first Indian software company to value its human resources; it used EVA as a tool to calculate value delivered to its customer. The company used Lev & Schwartz model to evaluate its human resources which was valued at Rs. 1.86 billion in 2013 and they thought that they can tell customers that what they are giving is much more in value for what customers are paying for then the customer would be little less worried about the price alone. Also by valuing its human resources the analysts felt that it was a step further in Infosys's focus on company's success. : "Comparing this figure over the years will tell us whether the value of our human resources is appreciating or not. For a knowledge intensive company like ours, that is vital information."

Basically EVA or economic value addition of a company is the profit earned by the firm less the cost of financing the firm's capital. The idea is that value is created when the return on the firm's economic capital employed is greater than the cost of that capital. This amount can be determined by making adjustments to GAAP accounting.

2012 2011 2010 2009 2008

Cost of capital

Return on risk free investment (%) 7.99 7.66 7.2 7 8

Market premium 5 5 5 7 7

Beta variant 0.71 0.71 0.68 0.74 0.76

Cost equity (%) 11.54 11.21 10.6 12.18 13.32

Average capital(%) 0 0 0 0 0

cost of debt - net capital tax (%) NA NA NA NA NA

Weighted average cost of capital (%) 11.54 11.21 10.6 12.18 13.32

Average capital employed 30382 25688 21634 17431 12527

Economic value added

Operating profit 9779 8102 6910 6421 4640

less: Tax 3367 2490 1681 919 685