NOPAT Calculator: Net Operating Profit After Tax from EBIT, Net Income or Revenue
Calculate NOPAT from operating income, net income or revenue and costs, with the effective tax rate, NOPAT margin, ROIC and economic profit (EVA).
How it works
NOPAT = operating income (EBIT) × (1 − tax rate) · EBIT = net income + income tax + interest expense − non-operating gains + non-operating losses = revenue − cost of goods sold − operating expenses · effective tax rate = income tax expense ÷ income before taxes · ROIC = NOPAT ÷ invested capital · economic profit = NOPAT − WACC × invested capital
NOPAT, net operating profit after tax, is the profit a company’s operations would earn if it had no debt. It takes operating income (EBIT) and applies the tax rate to it directly, so the interest bill and the tax saving that interest creates are left out. That makes companies with different amounts of borrowing comparable, and it is the starting point for return on invested capital (ROIC), economic value added (EVA) and unlevered free cash flow. Start from whichever figure you have. Operating income is the quickest. From net income, the calculator adds back income tax and interest expense and removes non-operating gains such as investment income or a gain on selling an asset. From revenue, it subtracts cost of goods sold and operating expenses. You can type a tax rate or let the calculator work out the effective rate from income tax expense and pre-tax income. Under More options you can add back one-time charges for a cleaner, recurring NOPAT and add invested capital and WACC to see ROIC and economic profit. The effective rate includes the tax shield on interest, so applying it to EBIT slightly understates operating taxes; analysts who want precision use the marginal rate instead. The EVA calculator needs NOPAT as an input; this one derives it.
Worked example
A company reports operating income of $2,400,000 and pays tax at 25%. Operating taxes are $2,400,000 × 25% = $600,000, so NOPAT = $2,400,000 × (1 − 0.25) = $1,800,000. Starting from net income gives the same answer: $1,650,000 net income + $550,000 income tax + $200,000 interest − $0 non-operating gains = $2,400,000 of operating income.
Sources: Omni Calculator: NOPAT (HattyBags and Alphabet Q1 2020 examples) · Corporate Finance Institute: NOPAT, simple and long-form formulas
Frequently asked questions
What is the NOPAT formula?
NOPAT = operating income × (1 − tax rate). For example, $700,000 of operating income at a 24% tax rate gives NOPAT of $700,000 × 0.76 = $532,000.
What is the difference between NOPAT and net income?
Net income is after interest, so it depends on how much the company borrows. NOPAT ignores financing: it taxes operating profit as if there were no debt and excludes non-operating gains and losses. A company with lots of debt has net income well below its NOPAT.
Which tax rate should I use for NOPAT?
Most people use the effective rate, income tax expense ÷ pre-tax income, from the latest annual report. Analysts building ROIC often prefer the marginal or statutory rate (for the US, 21% federal plus state) because the effective rate already includes the tax benefit of interest.
How is NOPAT used?
NOPAT divided by invested capital is ROIC. NOPAT minus a capital charge (WACC × invested capital) is economic value added. And NOPAT plus depreciation minus capital spending and the increase in working capital is free cash flow to the firm, used in DCF valuation.
Is NOPAT the same as EBIAT?
Practically yes. EBIAT, earnings before interest after taxes, is EBIT × (1 − tax rate), which is the simple NOPAT formula. Some analysts make extra adjustments to NOPAT, such as adding back one-time charges or operating lease interest.
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Educational estimate, not investment advice. Use the company’s filed statements and check any adjustments before relying on the result.