Economic Value Added (EVA) Calculator
Measure whether your business truly creates value: EVA subtracts the full cost of capital (WACC × invested capital) from after-tax operating profit to reveal economic profit above shareholders' required return.
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Positive EVA — the business creates value above its cost of capital
- 1
NOPAT (net operating profit after tax)
500,000 × (1 − 25% ÷ 100) = 375,000Operating profit adjusted for taxes, independent of capital structure. - 2
Capital charge
3,000,000 × 10% ÷ 100 = 300,000 - 3
EVA (economic value added)
375,000 − 300,000 = 75,000Positive EVA means the business earns above its cost of capital.
How does this calculator work?
EVA = NOPAT − (WACC × Invested Capital), where NOPAT = EBIT × (1 − Tax Rate). Positive EVA means the firm earns above its cost of capital (value created); negative EVA means it destroys value. The ROIC−WACC spread is the key management signal.
Formula
How this is calculated
Economic Value Added (EVA) is a performance metric popularised by Stern Stewart & Co. that measures whether a business earns more than its total cost of capital — both debt and equity. Accounting profit ignores the cost of equity, so a company can show a positive net income while actually destroying value if its return on capital falls below what shareholders require.
The calculation starts with EBIT (earnings before interest and taxes) and applies the effective tax rate to obtain NOPAT — Net Operating Profit After Tax. NOPAT represents the after-tax profit generated purely from operations, independent of the firm's capital structure. Next, the capital charge is computed as WACC (weighted average cost of capital) multiplied by the total invested capital (equity plus interest-bearing debt at book value). WACC reflects the blended required return of all capital providers, weighted by their share of the capital structure.
EVA = NOPAT − Capital Charge. A positive EVA means the business earns above its cost of capital, genuinely creating wealth for shareholders. A negative EVA means it is consuming capital — even if accounting profit is positive. The ROIC−WACC spread (also called the value spread) is equivalent to EVA divided by invested capital and is the key indicator management should track: a positive spread compounds value; a negative spread erodes it. Limitations: book-value invested capital can diverge from economic value, and WACC estimation involves many assumptions.
Frequently asked questions
A positive EVA means the company earns more than its total cost of capital (debt + equity). It is creating genuine economic value for shareholders — not just accounting profit. This is what drives long-run stock price appreciation.
WACC = (Equity / Total Capital) × Cost of Equity + (Debt / Total Capital) × Cost of Debt × (1 − Tax Rate). Cost of equity is typically estimated using the Capital Asset Pricing Model (CAPM). Industry-average WACC for mid-size businesses often ranges from 8–12%.
Invested capital is the total financing that has been deployed into the business: total equity (book value) plus all interest-bearing debt. It represents the amount of capital providers' money that management is responsible for generating a return on.
Also known as
TG we-Calculate Editorial Team. (2026). Economic Value Added (EVA) Calculator [Online calculator]. TG we-Calculate. https://we-calculate.com/calculator/economic-value-added-calculator
TG we-Calculate Editorial Team. "Economic Value Added (EVA) Calculator." TG we-Calculate. 2026. https://we-calculate.com/calculator/economic-value-added-calculator.
TG we-Calculate Editorial Team, "Economic Value Added (EVA) Calculator," TG we-Calculate, 2026. [Online]. Available: https://we-calculate.com/calculator/economic-value-added-calculator
@misc{wecalculate_economic_value_added_calculator, title = {Economic Value Added (EVA) Calculator}, author = {{TG we-Calculate Editorial Team}}, howpublished = {\url{https://we-calculate.com/calculator/economic-value-added-calculator}}, year = {2026}, note = {TG we-Calculate} }
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