Economic Value Added (EVA) Calculator
Assess true economic profit and shareholder wealth creation. Economic Value Added (EVA) measures net operating profit after tax (NOPAT) minus the cost of all capital invested in the enterprise, showing whether a company creates genuine economic value above its cost of capital.
Operating profit after taxes, before debt financing charges
Total debt plus equity invested in operations
Blended cost of debt and equity capital
True economic profit generated above the cost of capital
How to Use This Calculator
- Calculate Net Operating Profit After Tax (EBIT * (1 - Tax Rate)).
- Determine Total Invested Capital (Total Debt + Total Shareholders Equity - Cash).
- Enter Weighted Average Cost of Capital (WACC) hurdle rate.
- Review EVA: positive EVA indicates true shareholder wealth creation; negative EVA indicates capital destruction.
Formula & Calculation Methodology
Deducts the dollar cost of capital charge from after-tax operating profit to measure true economic value creation.
Worked Example
$350,000 NOPAT on $2,500,000 invested capital with a 9% WACC
Frequently Asked Questions
Why can an accounting-profitable company have a negative EVA?↓
Standard accounting only deducts debt interest, treating equity capital as free. If a company earns $100,000 net profit on $2,000,000 equity with a 10% cost of equity, it earned 5%—destroying $100,000 in economic value compared to alternative market investments.
Who developed the Economic Value Added (EVA) framework?↓
EVA was trademarked and popularized by Stern Stewart & Co. in the 1990s as a superior corporate governance metric that aligns executive compensation with true shareholder value.
What is the relationship between ROIC, WACC, and EVA?↓
If ROIC exceeds WACC, EVA is positive and the company creates shareholder wealth. If ROIC is below WACC, EVA is negative and every dollar invested destroys shareholder value.
How does investing in new projects affect EVA?↓
A new project only increases EVA if its return on invested capital exceeds the company WACC. Expanding into low-return projects dilutes corporate EVA.
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Source Citation & Disclaimer
Informational tool only; not licensed tax, legal, or financial advice.