Economic Value Added (EVA) Calculator

Measure your company’s true economic profit by comparing Net Operating Profit After Tax (NOPAT) to the cost of capital employed.

EVA Calculator

Use the same currency for all inputs (e.g. USD, EUR).

Equity + interest‑bearing debt, or total assets − non‑interest‑bearing current liabilities.

Enter as a percentage (e.g. 9 for 9%).

What is Economic Value Added (EVA)?

Economic Value Added (EVA) is a measure of a company’s true economic profit. It shows how much value the business creates (or destroys) after covering the full cost of capital used to generate its profits.

Unlike simple accounting profit, EVA charges the business for the capital it employs. A positive EVA means the company is generating returns above its cost of capital; a negative EVA means it is not covering that cost.

Formulas used by the EVA calculator

1. NOPAT – Net Operating Profit After Tax

From EBIT and tax rate:

\[ \text{NOPAT} = \text{EBIT} \times (1 - \text{Tax Rate}) \]

NOPAT is operating profit after tax, ignoring financing decisions (interest). It reflects the profitability of the core business operations.

2. Invested Capital

Common definitions:

\[ \text{Invested Capital} = \text{Equity} + \text{Interest‑Bearing Debt} \]

or

\[ \text{Invested Capital} = \text{Total Assets} - \text{Non‑Interest‑Bearing Current Liabilities} \]

3. Weighted Average Cost of Capital (WACC)

WACC formula:

\[ \text{WACC} = \frac{E}{E + D} \cdot r_e + \frac{D}{E + D} \cdot r_d \cdot (1 - T) \]

where:

  • \(E\) = market value of equity
  • \(D\) = market value of interest‑bearing debt
  • \(r_e\) = cost of equity
  • \(r_d\) = pre‑tax cost of debt
  • \(T\) = tax rate

4. Economic Value Added (EVA)

Core EVA formula:

\[ \text{EVA} = \text{NOPAT} - (\text{Invested Capital} \times \text{WACC}) \]

or equivalently:

\[ \text{EVA} = (\text{ROIC} - \text{WACC}) \times \text{Invested Capital} \]

where \( \text{ROIC} = \frac{\text{NOPAT}}{\text{Invested Capital}} \).

How to use the EVA calculator

  1. Choose a mode:
    • Simple EVA – if you already know NOPAT, invested capital, and WACC.
    • Detailed – if you want the tool to derive NOPAT and WACC from EBIT, tax rate, equity, debt, and their costs.
  2. Enter operating profit and tax data.
    In detailed mode, input EBIT and the effective tax rate to compute NOPAT.
  3. Enter capital structure.
    Provide equity, interest‑bearing debt, and their respective costs to estimate WACC.
  4. Click “Calculate EVA”.
    The calculator shows NOPAT, invested capital, WACC, the capital charge, and the final EVA value.
  5. Interpret the EVA badge.
    The badge indicates whether EVA is positive (value creating), near zero (neutral), or negative (value destroying).

Interpreting EVA results

  • EVA > 0 – the company is creating value above its cost of capital.
  • EVA ≈ 0 – returns roughly equal the cost of capital; value neutral.
  • EVA < 0 – the company is destroying value; returns are below the cost of capital.

Example EVA calculation

Suppose a company has:

  • EBIT = 1,500,000
  • Tax rate = 25%
  • Equity = 6,000,000, cost of equity = 12%
  • Debt = 4,000,000, cost of debt = 6%

Step 1 – NOPAT:

\[ \text{NOPAT} = 1{,}500{,}000 \times (1 - 0.25) = 1{,}125{,}000 \]

Step 2 – Invested capital:

\[ \text{Invested Capital} = 6{,}000{,}000 + 4{,}000{,}000 = 10{,}000{,}000 \]

Step 3 – WACC:

\[ \text{WACC} = \frac{6}{10} \cdot 0.12 + \frac{4}{10} \cdot 0.06 \cdot (1 - 0.25) = 0.072 + 0.018 = 0.09 \; (9\%) \]

Step 4 – EVA:

\[ \text{Capital Charge} = 10{,}000{,}000 \times 0.09 = 900{,}000 \] \[ \text{EVA} = 1{,}125{,}000 - 900{,}000 = 225{,}000 \]

The company generates an EVA of 225,000, meaning it creates that amount of value above its cost of capital.

FAQ

Is EVA the same as economic profit?

Yes. Economic Value Added is a branded implementation of the economic profit concept. Both measure profit after deducting a charge for all capital employed.

What is a “good” EVA value?

Higher positive EVA is better, but you should compare EVA over time and against peers. A growing positive EVA usually signals improving value creation.

Can EVA be negative even if net income is positive?

Yes. If the company’s return on invested capital (ROIC) is below its WACC, EVA will be negative even when accounting profits are positive.

Should I use book values or market values for capital?

In theory, EVA should be based on market values of equity and debt. In practice, many analysts use adjusted book values when market values are not available or are highly volatile.