Free EVA calculator. Measure true economic profit after deducting the cost of all capital. Determine whether a company creates or destroys shareholder value.
Economic Value Added (EVA) measures whether a company earns more than its total cost of capital. EVA = NOPAT − (Invested Capital × WACC). If EVA is positive, the company is creating value; if negative, it's destroying it.
Unlike accounting profit, EVA accounts for the cost of equity capital — the return shareholders expect. A company can be "profitable" by accounting standards yet have negative EVA because it doesn't earn enough to compensate for all capital employed.
This calculator computes EVA, EVA margin, EVA spread (ROIC − WACC), and shows the relationship between NOPAT, invested capital, and cost of capital. A positive EVA means the business is generating returns above what investors could earn elsewhere at comparable risk, while a negative EVA signals value destruction even if accounting profits appear healthy. By incorporating the full cost of both debt and equity capital, EVA cuts through accounting distortions and reveals whether a company is genuinely creating wealth for its shareholders or merely covering its costs.
Traditional profit metrics (net income, EPS) don't account for the cost of equity. A company could show growing profits while actually destroying shareholder value. EVA reveals the truth by charging for all capital, making it the best single measure of corporate performance and value creation. Companies that track EVA consistently tend to make better capital allocation decisions over time.
EVA = NOPAT − (Invested Capital × WACC) NOPAT = Operating Income × (1 − Tax Rate) ROIC = NOPAT / Invested Capital EVA Spread = ROIC − WACC
Result: EVA: $5,000,000 (value creation)
NOPAT of $15M with $100M invested capital at 10% WACC. Capital charge = $100M × 10% = $10M. EVA = $15M − $10M = $5M. ROIC = 15% vs WACC = 10%, so EVA spread = 5%. The company creates $5M in economic value.
Companies like Coca-Cola, Siemens, and Eli Lilly have adopted EVA as their primary performance metric. By tying compensation to EVA, managers are incentivized to think like owners: invest only when returns exceed the cost of capital, divest value-destroying assets, and optimize capital efficiency.
Purists make adjustments to accounting numbers: capitalize R&D and marketing (rather than expensing), eliminate goodwill amortization, normalize tax rates, and adjust for operating leases. Stern Stewart (EVA's creators) identified 164 potential adjustments, though most practitioners use 5-10 key ones.
Research shows that changes in EVA correlate with stock returns better than changes in EPS, ROE, or revenue growth. Investors who buy positive-EVA companies and short negative-EVA companies have historically outperformed the market.
Net Operating Profit After Tax — the profit from operations after taxes but before financing costs. NOPAT = Operating Income × (1 − Tax Rate). It isolates operational performance from capital structure decisions (debt vs equity). Use NOPAT, not net income, for EVA.
Invested capital = total equity + interest-bearing debt. It represents all capital deployed in the business. Operating assets minus operating liabilities is another way to calculate it. Exclude excess cash not needed for operations.
Net income deducts interest (cost of debt) but ignores the cost of equity. EVA deducts the full cost of all capital. A company with $10M net income but $15M equity capital charge has −$5M EVA — it's destroying value despite "profitability."
Yes, and that's one of its strengths. Calculate divisional EVA by using each division's NOPAT and invested capital with an appropriate cost of capital (which may differ by risk). This reveals which divisions create value and which destroy it.
MVA = Market Value of Firm − Invested Capital. It represents the cumulative value created over the company's lifetime. In theory, MVA = PV of all future EVAs. A company with consistently positive EVA should have high MVA.
Three levers: (1) Increase NOPAT by growing revenue or cutting costs without proportional capital increases. (2) Reduce invested capital by divesting underperforming assets. (3) Lower WACC by optimizing capital structure. The most impactful lever depends on the root cause.