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From Wikipedia, the free encyclopedia
In corporate finance, Economic Value Added (EVA), is an estimate of a firm's economic profit – being the value created in excess of the required return of the company's investors (being shareholders and debt holders). Quite simply, EVA is the profit earned by the firm less the cost of financing the firm's capital. The idea is that value is created when the return on the firm's economic capital employed is greater than the cost of that capital. This amount can be determined by making adjustments to GAAP accounting.
EVA = NOPAT - (Capital Invested x WACC)
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NOPAT: Net Operating profit after Tax
WACC: Weighted Average cost of capital
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