Economic Value Added (EVA) Calculator (NOPAT, ROIC and Capital Charge)
Profit left after paying for all the capital a business uses, plus NOPAT, the return on invested capital and how far it sits above or below the cost of capital.
Results
What this tool does
Accounting profit ignores the cost of equity, so a business can report a profit and still earn less than its investors could have made elsewhere. EVA fixes that by charging for the capital: NOPAT, the operating profit after tax, minus the cost of capital times the capital invested. It is positive only when the return on invested capital beats the cost of capital, which is the plain-language test of whether growth creates or destroys value. Analysts adjust the accounting figures (leases, research spending) in different ways, so the same company can show different EVA from different sources.
Formula
NOPAT = EBIT × (1 − tax) · EVA = NOPAT − WACC × capital = (ROIC − WACC) × capital
Variables
| Symbol | Meaning | Unit |
|---|---|---|
eb | Operating profit (EBIT) | — |
tx | Tax rate applied to operating profit | % |
ic | Invested capital (debt + equity put to work) | — |
wc | Cost of capital (WACC) | % |
EV | Economic value added (EVA) | — |
NP | NOPAT (operating profit after tax) | — |
CC | Capital charge | — |
RI | Return on invested capital (ROIC) | % |
SP | Spread of ROIC over the cost of capital | % |
Worked example
- Operating profit (EBIT)150,000
- Tax rate applied to operating profit25 %
- Invested capital (debt + equity put to work)800,000
- Cost of capital (WACC)9 %
- Economic value added (EVA)40,500
- NOPAT (operating profit after tax)112,500
- Capital charge72,000
- Return on invested capital (ROIC)14.06 %
- Spread of ROIC over the cost of capital5.06 %
Limitations
- This is an informational calculator, not personalised financial advice. Rates, fees, taxes and contract conditions vary between institutions and countries.
- The tool works with whatever currency you use for the inputs; it does not convert between currencies.