Economic Value Added Template
Economic Value Added Template
This economic value added template guides you to compute EVA using the amount of capital invested, WACC, and NOPAT.
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Economic Value Added (EVA) or Economic Profit is a measure based on the Residual Income technique that serves as an indicator of the profitability of projects undertaken. Its underlying premise consists of the idea that real profitability occurs when additional wealth is created for shareholders and that projects should create returns above their cost of capital.
EVA adopts almost the same form as residual income and can be expressed as follows:
EVA = NOPAT – (WACC * Capital Invested)
Where:
- NOPAT = Net Operating Profits After Tax
- WACC (Weighted Average Cost of Capital) = Ke*E/ (E+D) + Kd (1-t)*D/ (E+D)
- Capital Invested = Equity + Long-Term Debt at the Beginning of the Period
(WACC * Capital Invested) is also known as finance charge
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