📈

Economic Value Added (EVA) Calculator

Calculate economic value added (EVA = NOPAT − WACC × invested capital), the capital charge, ROIC and the EVA spread to see whether a business earns more than its cost of capital.

Operating profit (EBIT)

Tax rate

Invested capital (debt + equity − cash)

Weighted average cost of capital (WACC)

Loading calculator…

How it works

NOPAT = EBIT × (1 − tax rate) · capital charge = WACC × invested capital · EVA = NOPAT − capital charge = (ROIC − WACC) × invested capital

Economic value added, popularised by Stern Stewart & Co. in the 1990s, is the profit left after charging the business for all the capital it uses — not only interest on debt, but also the return shareholders expect. Accounting profit ignores the cost of equity, so a company can report a profit while destroying value. A positive EVA means the operation earns more than its weighted average cost of capital; growing EVA year after year is the goal. Stern Stewart applies many accounting adjustments (capitalising R&D, removing goodwill amortisation); this is the basic form.

Worked example

EBIT of 2,000,000 taxed at 25% gives NOPAT of 1,500,000. With 10,000,000 of invested capital and a 9% WACC the capital charge is 900,000, so EVA = 1,500,000 − 900,000 = 600,000. Equivalently, ROIC of 15.00% beats WACC by 6.00 points, and 6% × 10,000,000 = 600,000.

Sources: Investopedia — Economic Value Added (EVA) · Corporate Finance Institute — Economic Value Added

Frequently asked questions

What is a good EVA?

Any positive EVA means the company earns more than its cost of capital. Investors look for EVA that is positive and rising, because that is what increases the value of the firm.

How is EVA different from net income?

Net income deducts interest but not the cost of equity. EVA deducts a charge for all capital, so it is lower than net income and can be negative when profit is positive.

What counts as invested capital?

The money tied up in operations: interest-bearing debt plus equity, minus excess cash — or equivalently net working capital plus net fixed assets. Use the same definition every year.

What is the relationship between EVA and MVA?

Market value added (MVA) is the market value of the firm minus its invested capital; in theory it equals the present value of all future EVA.

Related calculators

WACC Calculator

Compute the weighted average cost of capital from the value and cost of equity and debt, including the tax shield on interest.

Return on Invested Capital (ROIC) Calculator

Measure how well a business turns all its capital — debt and equity — into after-tax operating profit with return on invested capital.

ROCE Calculator

Calculate return on capital employed (ROCE = EBIT ÷ (total assets − current liabilities)), capital employed and the spread over your cost of capital to see whether a business creates value.

Cost of Equity (CAPM) Calculator

Estimate the cost of equity with the Capital Asset Pricing Model from the risk-free rate, beta and the expected market return.

DCF Calculator

Estimate a stock’s intrinsic value per share with a simplified discounted cash flow model: project free cash flow, discount it, and add a terminal value.

Educational estimate, not accounting or investment advice. Analysts and auditors adjust these figures with their own definitions — use the exact definitions of your reporting framework or loan agreement.