A positive accounting profit doesn’t necessarily mean a company created value — EVA charges that profit for the full cost of every dollar of capital used to generate it.
How it works
Multiplying WACC by invested capital gives the capital charge — the minimum dollar return capital providers require. Subtracting that charge from NOPAT gives EVA: positive means value created, negative means value destroyed.
What this does not include
This does not include the various accounting adjustments (to R&D capitalization, operating leases, and other items) that more rigorous EVA implementations apply to NOPAT and invested capital to reduce accounting distortions.
How to use this calculator
- Enter NOPAT, WACC, and invested capital.
A worked example
NOPAT $500,000, WACC 8%, invested capital $4,000,000: capital charge = 4,000,000 × 0.08 = $320,000, EVA = 500,000 − 320,000 = $180,000.
What the variables mean
| Variable | Meaning |
|---|---|
| NOPAT | Net operating profit after tax |
| WACC | Weighted average cost of capital |
| Invested capital | Total capital invested in the business |
Edge cases worth knowing
A positive EVA means the business is generating value above its cost of capital — not just profit, but profit exceeding what investors could have earned elsewhere at the same risk level. A profitable company can still have negative EVA if its capital costs are high enough.
A negative invested capital has no real-world meaning, so the calculator declines to show a result for that input.
Frequently asked questions
How is EVA different from net income?
Net income only charges for the cost of debt (as interest expense); EVA additionally charges for the cost of equity, which accounting profit ignores entirely.
Can a profitable company have negative EVA?
Yes — a company can be profitable by accounting standards while still earning less than its capital providers require, meaning it’s destroying economic value even as it reports positive net income.
Is EVA the same as the ROIC-WACC spread?
They’re closely related — EVA equals the ROIC-minus-WACC spread multiplied by invested capital, expressing the same value-creation concept in dollar terms rather than as a percentage.
