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NOPAT / CAPITAL CHARGE

Economic Value Added Calculator

Subtract a supplied capital charge from after-tax operating profit. Review the entered period, benchmark, and risk assumptions alongside the result.

  • 01 Calculated in this tab
  • 02 Values stay in this browser tab
  • 03 Use boundary

Conversion input

Known value

Filter by unit name, symbol, or code. Your current selections remain available.

Scenario inputs

Preparing the calculator...

METHOD / WORKED EXAMPLE

Show the capital charge before labeling value creation

Economic value added compares operating profit after tax with a dollar charge for the capital committed to produce it, keeping operating performance separate from financing accounting.

WORKED DEFAULT

Check the calculation with the default inputs

With $1.5 million NOPAT, $10 million invested capital, and 10% cost of capital, the charge is $1 million and EVA is positive $500,000.

  1. Calculate capital charge$10m x 10% = $1m
  2. Use after-tax operating profitNOPAT = $1.5m
  3. Find surplus$1.5m - $1m = $0.5m

READ THE RESULT

Interpret the output in context

Positive EVA means the entered NOPAT exceeds this supplied capital charge for the period. It does not by itself establish market value, cash realization, or sustainable future advantage.

ASSUMPTIONS AND LIMITS

Know where the model stops

  • NOPAT and invested capital use compatible accounting adjustments.
  • The capital base corresponds to the profit measurement period.
  • Cost of capital matches the operating risk, currency, and financing assumptions.

EVA depends on accounting adjustments and the selected capital base; this compact scenario is not a complete company valuation.

Aswath Damodaran: economic value added

COMMON QUESTIONS

Economic Value Added Calculator FAQs

Is economic value added the same as net income?

No. EVA starts from after-tax operating profit and subtracts a charge for all invested capital. Net income is after interest and follows financial-reporting classifications that may not match the operating and capital adjustments used in EVA. Reconcile NOPAT, leases, research spending, acquisitions, non-operating assets, and the capital base before comparing companies or periods.

Can EVA be negative when the business is profitable?

Yes. Positive accounting operating profit may still be below the required dollar return on invested capital. In that case the entered capital charge exceeds NOPAT and EVA is negative. That result is sensitive to cost of capital, accounting adjustments, and capital measurement, so inspect the components instead of treating the sign as a standalone management verdict.

Does one year of positive EVA prove value creation?

Not necessarily. A one-period result may reflect cyclical conditions, underinvestment, asset age, acquisitions, accounting choices, or an unusually low capital base. Sustainable value depends on future excess returns and reinvestment opportunities. Review a consistent time series, cash flows, competitive position, and the present value of expected future EVA before making valuation conclusions.

Use boundary

Calculation path

Multiply invested capital by cost of capital to form the capital charge, then subtract it from after-tax operating profit.

Calculation path

EVA = NOPAT - (cost of capital x invested capital).