Corporate Finance & Valuation Lab

Economic Value Added (EVA) Calculator

Model Economic Value Added (EVA), ROIC-WACC economic spread, NOPAT, invested capital charge, and MVA residual income wealth creation.

EVA Valuation Engine Sensitivity Heatmap EVA Financial Theory FAQ

Corporate Archetypes

Load calibrated economic profit models.

Step 1: Input Operating Income, Capital Structure & Cost of Capital

Economic Profit Inputs

$
Earnings Before Interest and Taxes.
%
Blended income tax rate.
$
Net working capital + fixed assets.
%
Hurdle rate / blended cost of debt & equity.
$
Current traded market value of equity + net debt.
Economic Value Added (EVA)
+$41.15M
True economic wealth creation
Economic Spread (ROIC - WACC)
+34.29%
ROIC (42.8%) − WACC (8.5%)
Return on Capital (ROIC)
42.79%
NOPAT $51.35M ÷ $120M Capital
Market Value Added (MVA)
+$730.00M
Market Cap − Book Invested Capital

ROIC vs. WACC Economic Profit Matrix (EVA $)

Evaluates dollar economic wealth creation across varying operating returns (ROIC) and capital hurdle rates (WACC).

Stern Stewart & Value-Based Management

Principles of Economic Value Added

Key financial theory governing the EVA framework:

  • Equity is Not Free: Traditional accounting deducts debt interest but treats equity capital as free. EVA imposes a charge on all capital entrusted to management.
  • The Wealth Creation Criterion: A business creates shareholder value if and only if $ ext{ROIC} > ext{WACC}$. If $ ext{ROIC} < ext{WACC}$, expanding revenues accelerates wealth destruction.
  • Residual Income Valuation: A firm's intrinsic market value equals its current invested capital plus the discounted present value of all future expected EVA.
  • Capital Efficiency: Management can boost EVA by increasing operating margins, improving asset turnover, or divesting underperforming capital assets.

Calculate hurdle rates in the WACC Lab.

Mathematical Formulation

EVA mathematical equations

NOPAT = EBIT × ( 1 - Tax_Rate )

ROIC = NOPAT ÷ Invested_Capital

Capital_Charge = Invested_Capital × WACC

EVA = NOPAT - Capital_Charge = Invested_Capital × ( ROIC - WACC )

MVA = Enterprise_Market_Value - Invested_Capital

Decompose return on equity in the DuPont Analysis Lab.

FAQ

Economic value added & ROIC questions

What is Economic Value Added (EVA)?

Economic Value Added (EVA) is a measure of true economic profit developed by Stern Stewart & Co. It deducts the full opportunity cost of capital (both debt and equity) from after-tax operating profit: EVA = NOPAT - (Invested Capital x WACC).

How is EVA different from accounting Net Income?

Accounting Net Income only deducts the interest cost of debt, treating equity capital as free. EVA charges the firm for all capital tied up in operations. A company can report positive accounting profit while simultaneously destroying economic shareholder wealth if ROIC < WACC.

What is the ROIC-WACC Economic Spread?

Economic Spread = ROIC - WACC. A positive spread indicates wealth creation, meaning every dollar reinvested generates returns in excess of investors' required hurdle rate. A negative spread destroys value.

What is Market Value Added (MVA)?

Market Value Added (MVA) is the difference between a company's total enterprise market value and the capital invested by debt and equity holders. It represents the present value of all expected future EVA.

Can I export the EVA analysis and sensitivity matrix to CSV?

Yes. You can export complete NOPAT, capital charge, ROIC spread metrics, and the 7x5 discount rate sensitivity matrix as a UTF-8 CSV spreadsheet with formula defense.

Continue Exploring Corporate Finance & Valuation Tools

Explore our Strategy & Decision-Making Hub, calculate cost of capital in the WACC Lab, decompose ROE in the DuPont Lab, model buyouts in the LBO Lab, or calculate equity intrinsic value in the Dividend Discount Lab.