Economic Value Added (EVA) Calculator

Formula

The formula to calculate the Economic Value Added (EVA) is:

\[ EVA = NOPAT - (WACC \times CI) \]

Where:

$ EVA $ is the economic value added.
$ NOPAT $ is the net operating profits after tax.
$ WACC $ is the weighted average cost of capital.
$ CI $ is the capital invested.

What is Economic Value Added (EVA)?

Economic Value Added (EVA) is a measure of the profit added to the economy by a business. It is calculated by subtracting the cost of capital from the net operating profits after tax. EVA helps in understanding how effectively a company is generating profits relative to its cost of capital.

Example Calculation

Consider an example where:

Net Operating Profits After Tax (NOPAT): $500,000
Weighted Average Cost of Capital (WACC): 10%
Capital Invested (CI): $2,000,000

Using the formula to calculate the Economic Value Added:

\[ EVA = 500000 - (0.10 \times 2000000) = 500000 - 200000 = 300000 \text{ $} \]

This means that the economic value added for this example is $300,000.