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Economic Value Added Formula

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Economic Value Added is a performance metric that calculates the creation of shareholder value. Check FAQs

EVA = NOPAT - WACC \cdot TC

EVA - Economic Value Added?NOPAT - Net Operating Profit After Tax?WACC - Weighted Average Cost of Capital?TC - Total Invested Capital?

Economic Value Added Example

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Here is how the Economic Value Added equation looks like with Values.

Here is how the Economic Value Added equation looks like with Units.

Here is how the Economic Value Added equation looks like.

449999 = 1E+6 - 11 \cdot 50001

449999 = 1E+6 - 11 \cdot 50001

449999 = 1E+6 - 11 \cdot 50001

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Economic Value Added Solution

Follow our step by step solution on how to calculate Economic Value Added?

FIRST Step Consider the formula

EVA = NOPAT - WACC \cdot TC

Next Step Substitute values of Variables

∴

EVA = 1E+6 - 11 \cdot 50001

Next Step Prepare to Evaluate

∴

EVA = 1E+6 - 11 \cdot 50001

LAST Step Evaluate

∴

EVA = 449999

Economic Value Added Formula Elements

Variables

Economic Value Added

Economic Value Added is a performance metric that calculates the creation of shareholder value.

Symbol: EVA

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Economic Value Added

Net Operating Profit After Tax

Net Operating Profit After Tax is a company's after-tax operating profit for all investors, including shareholders and debt holders.

Symbol: NOPAT

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Net Operating Profit After Tax

Weighted Average Cost of Capital

The Weighted Average Cost of Capital is the rate that a company is expected to pay on average to all its security holders to finance its assets.

Symbol: WACC

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Weighted Average Cost of Capital

Total Invested Capital

Total Invested Capital is the total amount of money a company raises through the sale of shares and the issuance of bonds.

Symbol: TC

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Total Invested Capital

Other formulas in Performance Ratio category

Go Free Cash Flow

FCF = CFO - CAPEX

Go Free Cash Flow to Firm

FCFF = CFO + (Int \cdot (1 - tax)) - CAPEX

Go Debt to Assets Ratio

DA = \frac{TL}{TA}

Go Debt to Equity Ratio

R D/E = \frac{TL}{TSE} \cdot 100

How to Evaluate Economic Value Added?

Economic Value Added evaluator uses Economic Value Added = Net Operating Profit After Tax-Weighted Average Cost of Capital*Total Invested Capital to evaluate the Economic Value Added, Economic Value Added measures a company's economic profit by deducting the cost of capital from its net operating profit after tax, reflecting the value created or destroyed by management. Economic Value Added is denoted by EVA symbol.

How to evaluate Economic Value Added using this online evaluator? To use this online evaluator for Economic Value Added, enter Net Operating Profit After Tax (NOPAT), Weighted Average Cost of Capital (WACC) & Total Invested Capital (TC) and hit the calculate button.

FAQs on Economic Value Added

What is the formula to find Economic Value Added?

The formula of Economic Value Added is expressed as Economic Value Added = Net Operating Profit After Tax-Weighted Average Cost of Capital*Total Invested Capital. Here is an example- 449999 = 1000010-11*50001.

How to calculate Economic Value Added?

With Net Operating Profit After Tax (NOPAT), Weighted Average Cost of Capital (WACC) & Total Invested Capital (TC) we can find Economic Value Added using the formula - Economic Value Added = Net Operating Profit After Tax-Weighted Average Cost of Capital*Total Invested Capital.

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Economic Value Added Formula

Economic Value Added Example

Economic Value Added Solution

Economic Value Added Formula Elements

Other formulas in Performance Ratio category

How to Evaluate Economic Value Added?

FAQs on Economic Value Added

Variable Name