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Economic Value Added (EVA) is a financial performance metric that measures a company’s true economic profit by comparing its net operating profit after taxes (NOPAT) with the cost of capital applied to the invested capital, using the core formula EVA = NOPAT − (Invested Capital × WACC). It shows whether a business is generating returns above the minimum rate required by providers of debt and equity, so a positive EVA indicates value creation for shareholders, while a negative EVA signals value destruction after funding costs. Because it explicitly charges profit for the full cost of capital, EVA is widely used by large companies for project evaluation, performance measurement, incentive design, and capital allocation decisions.
Economic Value Added (EVA) Calculator – INR
EVA · WACC · NOPAT
Calculate Economic Value Added in Indian rupees using either EBIT-based NOPAT or ROIC spread method to see if your business generates returns above its cost of capital.
Step 1 · Choose method
Using EBIT method: EVA = NOPAT - (WACC × invested capital).
Step 2 · Enter inputs (INR)
Step 3 · Results (INR)
Economic value added (EVA)
Enter inputs to see EVA, NOPAT and capital charge in rupees.
Awaiting inputs
₹ 0.00 (INR)
NOPAT: ₹ 0.00Capital charge: ₹ 0.00
Return on capital (ROIC)
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NOPAT divided by invested capital (approximate return percentage).
Spread vs WACC
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ROIC minus WACC. Positive spread supports value creation.
Formulas:
EVA = NOPAT minus WACC multiplied by invested capital, and EVA = ROIC minus WACC, multiplied by invested capital.
How this EVA calculator works
1. EBIT method: NOPAT equals EBIT multiplied by one minus tax rate; EVA equals NOPAT minus WACC multiplied by invested capital.
2. Spread method: EVA equals ROIC minus WACC, multiplied by invested capital.
3. Interpretation: Positive EVA in INR means the company earns more than its rupee cost of capital; negative EVA suggests value destruction.
Frequently Asked Questions on Economic Value Added (EVA)
1. What is Economic Value Added (EVA)?
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EVA is a measure of a company’s economic profit, calculated as net operating profit after taxes (NOPAT) minus the cost of capital applied to invested capital, showing how much value is created for investors after funding costs.
2. How is EVA different from net profit?
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Net profit simply deducts accounting expenses from revenue, while EVA also subtracts a capital charge (invested capital multiplied by the cost of capital), so it reflects whether returns exceed the required rate for debt and equity providers.
3. Why do companies use EVA?
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Companies use EVA to evaluate projects, business units, and overall performance because it helps align management decisions with shareholder value creation and guides capital allocation toward activities that earn more than the cost of capital.
4. What inputs are needed to calculate EVA?
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EVA typically requires NOPAT or EBIT with a tax rate, invested capital (equity plus interest-bearing debt used in operations), and the weighted average cost of capital (WACC) to compute the capital charge and final EVA figure.
5. What are the main limitations of EVA?
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EVA relies on estimates for WACC and sometimes accounting adjustments to profits and capital, can be complex to implement, and does not fully capture future growth prospects or risk on its own, so it is best used with other performance metrics.
