Overview
Enter Net Operating Profit After Tax (NOPAT), invested capital, and a weighted average cost of capital (WACC) to calculate Economic Value Added: EVA = NOPAT − (Invested Capital × WACC). The term being subtracted, invested capital multiplied by WACC, is the capital charge - the minimum dollar return investors require for tying up that capital, given its risk. A positive EVA means the company generated more profit than that minimum required return, genuinely creating value beyond its cost of capital; a negative EVA means it didn't clear that bar, even if it was still profitable in an accounting sense. WACC is taken here as a direct percentage input rather than computed from a separate formula, since a company's WACC depends on its specific mix and cost of debt and equity - if you need to derive an expected return on equity first, see the CAPM Calculator. This tool reports the number without attaching a "good" or "bad" verdict, since what counts as an acceptable EVA depends heavily on industry, growth stage, and capital intensity. Runs entirely client-side, and this is an informational estimate, not financial advice.
Best for: Checking whether a company's profit exceeds the minimum return investors require on its invested capital
How to use this tool
- Enter NOPAT. Net Operating Profit After Tax - operating profit adjusted for taxes, before financing costs.
- Enter invested capital. The total capital (debt plus equity) tied up in the business's operations.
- Enter WACC (%). The weighted average cost of capital - the required return given the company's specific financing mix.
- Read the EVA. NOPAT minus the capital charge (invested capital × WACC).
Frequently asked questions
WACC depends on a company's specific mix of debt and equity, its cost of debt, and its cost of equity - each of which requires its own set of inputs and assumptions. Rather than bundling a separate WACC-derivation formula into this tool, WACC is entered directly as a percentage; the CAPM Calculator can help estimate the cost-of-equity piece of that calculation.
No - it reports the number without a verdict, since what counts as a strong EVA varies enormously by industry, company size, and how capital-intensive the business is. A positive EVA generally indicates value creation above the cost of capital, and a negative EVA indicates the opposite, but comparing it against a benchmark is left to you.
Net income doesn't account for the cost of the capital used to generate it - a company can be profitable on paper while still not earning enough to compensate investors for the risk and opportunity cost of that capital. EVA subtracts that capital charge explicitly, which is why a profitable company can still have negative EVA.