Wealth Added Index


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Wealth Added Index

A measure of the wealth created for the shareholders of a publicly-traded company. Unlike most such measures, it does not account for profits or dividends; rather, the WAI assumes that wealth is created only if the return for the shareholders is greater than the cost of equity. Cost of equity is the return investors demand in exchange for taking on risk; the WAI holds that if the return does not exceed this, then shareholders are not receiving what they demand and are effectively destroying their own wealth by maintaining a position in the company.