Economic Value Added (EVA) Calculator

You can use this Economic Value Added (EVA) calculator to assess an organization's real economic performance. Investors employ EVA to assess the extent to which a capital investment in an organization has yielded value compared to alternative investments.

To calculate the EVA of a company, simply input the details in each of the fields in the form below and click on the "Calculate EVA" button.

EVA Calculator

NOPAT

%

Capital Charges

%

What is EVA?

Economic Value Added (EVA) is a formally registered trademark of Stern Stewart & Co. It represents a company performance measure that can be reliably used to inform investment decision and help shareholders achieve a greater return on investment.

EVA, which can also be referred to as economic profit, is an evaluation approach that is derived from the residual income method. It represents a high-level indication of the extent to which investments are profitable. Its fundamental principle consists of the notion that profitability is generated when shareholders benefit from additional wealth and that investments should generate returns that are higher than the initial capital cost.

Its underlying premise consists of the idea that real profitability occurs when additional wealth is created for shareholders and that projects should create returns above their cost of capital.

EVA Formula

The EVA formula is outlined below:

EVA = Net Operating Profit After Taxes (NOPAT) − Capital Charges

EVA = EBIT × (1 – Tax Rate) – (WACC × Invested Capital)

Where:

NOPAT represents the net operating profit after tax,

EBIT is earnings before interest and taxes,

WACC is the weighted average cost of capital,

Invested Capital is the equity plus long-term debt at the outset of the period of interest.

EVA serves as a measurement that informs shareholders and corporate representatives as to whether business value has been generated or eradicated. Specifically, if the EVA is higher than 0, the project has generated value; if it is below 0, the shareholders would have been better off with a dividend.

You may also be interested in our ROIC (Return on Invested Capital) Calculator

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