Economic Value Added (EVA) Calculator
Calculate Economic Value Added from Net Operating Profit After Tax, invested capital, and Weighted Average Cost of Capital.
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Result
Economic Value Added (EVA)
$400,000
Capital Charge
$800,000
How to Use the Economic Value Added (EVA) Calculator
Enter Net Operating Profit After Tax (NOPAT), the amount of invested capital deployed in the business, and the Weighted Average Cost of Capital (WACC) as a percentage. EVA measures whether a company is actually creating value above and beyond what it costs to fund its capital — a positive EVA means the business is generating returns higher than its cost of capital, while a negative EVA means it is destroying value even if it's accounting-profitable.
Example
A company has NOPAT of $1,200,000, invested capital of $8,000,000, and a WACC of 10%. The capital charge is $8,000,000 × 10% = $800,000, so EVA = $1,200,000 − $800,000 = $400,000. The business is creating $400,000 of economic value beyond its cost of capital.
Common Use Cases
- Evaluating whether a business unit or investment is truly creating shareholder value, not just accounting profit.
- Comparing capital efficiency across divisions or competitors that use different amounts of invested capital.
- Supporting capital allocation decisions by identifying where returns exceed (or fall short of) the cost of capital.
FAQs
- What does a negative EVA mean? A negative EVA means the business isn't generating enough operating profit to cover the cost of the capital invested in it — it can be accounting-profitable while still destroying economic value for shareholders.
- How is NOPAT different from net income? NOPAT is operating profit after tax but before financing costs like interest, so it reflects the profitability of core operations independent of how the company is financed — net income includes interest expense and other non-operating items.
- Where does the WACC figure come from? WACC blends the cost of a company's debt and equity, weighted by how much of each is used to fund the business. It's typically calculated separately (or sourced from financial data providers) and entered here as an input.