Economic Profit

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Finance

Economic Profit is a fast, free finance calculator. Enter EBIT (Operating Profit), Tax Rate and Capital Employed to get an instant, accurate result — complete with the formula, a step-by-step worked example, and answers to common questions, all on one page and private to your browser.

Formula

EVA = NOPAT - (Capital × WACC), where NOPAT = EBIT × (1 - Tax Rate)
  • Positive EVA = value creation
  • Negative EVA = value destruction
  • ROIC > WACC needed for sustainable growth

Company EVA

Inputs
  • EBIT (Operating Profit): 1000000 $
  • Tax Rate: 25 %
  • Capital Employed: 5000000 $
  • WACC (Weighted Avg Cost of Capital): 8 %

A company with $1M EBIT, 25% tax, $5M capital, 8% WACC has $750k NOPAT, $400k cost of capital, so $350k EVA.

Frequently asked questions

What is EVA?
Economic Value Added measures true profit after accounting for cost of capital invested in the business.