Economic Value Added (EVA) Calculator (NOPAT − capital charge, ROIC vs WACC)

Understanding the economic value added (EVA) calculator — concept and principle

This calculator finds economic value added, the profit left after charging for all the capital a business uses, including shareholders' money. It shows NOPAT, the capital charge, return on invested capital (ROIC), the spread over WACC and whether the company creates value. Use it for corporate finance courses, performance measurement and comparing business units.

NOPAT of $9M beats the $7.2M that investors require on $80M, leaving $1.8M of economic profit.

How it is calculated

NOPAT = operating profit (EBIT) × (1 − tax rate).
Capital charge = WACC × invested capital.
EVA = NOPAT − capital charge.
ROIC = NOPAT ÷ invested capital.
Equivalent: EVA = (ROIC − WACC) × invested capital.

Invested capital is interest-bearing debt plus equity (or total assets minus non-interest-bearing current liabilities).

The principle

Accounting profit charges for borrowed money through interest, but not for shareholders' money, which also has a cost: investors expect a return for their risk. EVA charges for all capital at the weighted average cost of capital. A business creates value only when its return on capital beats that cost; otherwise investors would be better off putting their money elsewhere at the same risk. Practitioners often adjust accounting figures, for example capitalising research and development, which this simple version leaves out.

Worked example

Default inputs: EBIT $12,000,000, tax rate 25%, invested capital $80,000,000, WACC 9%.

NOPAT = 12,000,000 × 0.75 = $9,000,000.
Capital charge = 9% × 80,000,000 = $7,200,000.
EVA = 9,000,000 − 7,200,000 = $1,800,000.
ROIC = 9,000,000 ÷ 80,000,000 = 11.25%; spread = 2.25 points.
Check: 2.25% × 80,000,000 = $1,800,000. Verdict: creates value.

Each point is the calculator re-run with only “Operating profit (EBIT)” changed; the gold point is the default example. Change the inputs above and this chart follows your numbers.

Operating profit (EBIT)	Economic value added (EVA)
3e+06	-$4,950,000
6e+06	-$2,700,000
9e+06	-$450,000
1.2e+07	$1,800,000
1.5e+07	$4,050,000
1.8e+07	$6,300,000
2.4e+07	$10,800,000

How to read the result

Positive EVA means the business earns more than its capital costs; negative means it destroys value even if accounting profit is positive. Growth adds value only if the new capital earns above WACC. Compare EVA over several years and across units, but remember it depends on the WACC estimate.

Common mistakes

Using net income instead of NOPAT.
Including non-interest-bearing liabilities, such as accounts payable, in invested capital.
Using a cost of debt or equity alone instead of WACC.
Comparing EVA across firms of very different size without looking at ROIC.

Keep in mind: EVA depends on the WACC estimate and accounting choices. This is a simplified measure, not investment advice.

Frequently asked questions

What is the difference between EVA and net income?

Net income does not charge for equity capital; EVA does.

Can a profitable company have negative EVA?

Yes, if its return on capital is below its cost of capital.

What is ROIC?

Return on invested capital, NOPAT divided by the capital invested in the business.

Sources: EVA = NOPAT − WACC × invested capital (standard corporate-finance formula; e.g. A. Damodaran, Investment Valuation, 3rd ed., Wiley, 2012)

Checked 9 Nov 2026. EVA = NOPAT − invested capital × WACC with NOPAT = operating profit × (1 − tax rate) and invested capital = debt + equity: section 16.2 “Economic Value Added” of an open bookdown.org text on marketing research (secondary); standard formula.

Your numbers