Is Economic Profit the same as EVA (Economic Value Added)?

In practice, yes. Both measure value creation after charging the business for the cost of capital: Economic Profit/EVA = NOPAT − (WACC × Invested Capital).

I only have EBIT — how do I calculate Economic Profit?

Use the “EBIT → NOPAT” mode and apply after-tax operating profit: NOPAT = EBIT × (1 − effective tax rate). Then the calculator subtracts the capital charge (Invested Capital × WACC).

What should I enter as “Invested Capital” so the result isn’t misleading?

Use operating capital employed (the capital tied up in the business). A common practical approach is Equity + Net Interest-Bearing Debt (net debt), excluding excess cash, and ideally using an average balance for the period.

Why is Economic Profit negative even if the company has positive operating profit?

Because the capital charge can exceed NOPAT. That means ROIC is below WACC (the business is not earning enough to cover the return required by capital providers), so it’s destroying value.

Economic Profit (EVA) Calculator — NOPAT, WACC & Capital Charge

Economic Profit Calculator

Economic profit (also called EVA) measures value creation after charging a cost for the capital you employ. Formula: Economic Profit = NOPAT − (Invested Capital × WACC).

How do you want to enter operating profit?

Use this if you already know NOPAT (after-tax operating profit).

NOPAT

EBIT (Operating Income)

Effective Tax Rate

Invested Capital

WACC

Results

Economic Profit $
Economic Profit Spread (as % of capital) %
Capital Charge $
NOPAT $
Interpretation

What is Economic Profit?

Economic profit (often called EVA or residual income) is after-tax operating profit minus a capital charge for the money tied up in the business.

It matters because it links performance to value creation: positive economic profit means returns exceed WACC; negative means the business is earning below its cost of capital.

Formula

Example

Mode A: NOPAT (direct)

NOPAT = $250,000; Invested Capital = $1,000,000; WACC = 8.5%
Capital Charge = $1,000,000 × 0.085 = $85,000
Economic Profit = $250,000 − $85,000 = $165,000
Spread = $165,000 ÷ $1,000,000 = 16.5%

Mode B: EBIT → NOPAT

EBIT = $300,000; Tax Rate = 25% ⇒ NOPAT = $300,000 × (1 − 0.25) = $225,000
With Invested Capital = $1,000,000 and WACC = 8.5%: Capital Charge = $85,000
Economic Profit = $225,000 − $85,000 = $140,000
Spread = $140,000 ÷ $1,000,000 = 14.0%

How to Use the Economic Profit Calculator

Pick whether you already know NOPAT or need to convert from EBIT, then enter invested capital and WACC to see economic profit, capital charge, and the value-creation spread.

Choose your input mode
- - Select NOPAT (direct) if you already have after-tax operating profit.
- Select EBIT → NOPAT if you only have operating income and a tax rate.
Enter operating profit
- - In NOPAT (direct) mode, enter NOPAT.
- In EBIT → NOPAT mode, enter EBIT and Effective Tax Rate so the tool estimates NOPAT:
Enter Invested Capital and WACC
- - Input Invested Capital (capital employed in operations) and WACC (as a %).
- The tool computes the capital charge and economic profit:
Read the Results panel
- - Economic Profit: dollar value created (or destroyed) after covering the cost of capital.
- Economic Profit Spread: value creation rate vs capital, shown as a %.
Stress-test with Scenarios and share outputs
- - Use Scenarios to compare different WACC/capital/profit assumptions.
- Use Share / Embed if you want to save or reuse the exact setup.

Frequently Asked Questions

In practice, yes. Both measure value creation after charging the business for the cost of capital: Economic Profit/EVA = NOPAT − (WACC × Invested Capital).
Use the “EBIT → NOPAT” mode and apply after-tax operating profit: NOPAT = EBIT × (1 − effective tax rate). Then the calculator subtracts the capital charge (Invested Capital × WACC).
Use operating capital employed (the capital tied up in the business). A common practical approach is Equity + Net Interest-Bearing Debt (net debt), excluding excess cash, and ideally using an average balance for the period.
Because the capital charge can exceed NOPAT. That means ROIC is below WACC (the business is not earning enough to cover the return required by capital providers), so it’s destroying value.

Methodology & Sources

Bibliography

Mark Van Clieaf; Karel Leeflang (2014). The Alignment Gap Between Say on Pay Voting and Creating Value — Investor Responsibility Research Center Institute (IRRCi) https://weinberg.udel.edu/files/2022/08/final-sop-dec-2014.pdf
Accessed 2025-12-14
Michael J. Mauboussin; Dan Callahan, CFA (2022). Return on Invested Capital: How to Calculate ROIC and Handle Common Issues — Morgan Stanley Investment Management (Counterpoint Global Insights) https://www.morganstanley.com/im/publication/insights/articles/article_returnoninvestedcapital.pdf
Accessed 2025-12-14
Pablo Fernández (2003). Equivalence of Ten Different Methods for Valuing Companies by Cash Flow Discounting (CIIF Working Paper WP No 524) — IESE Business School, University of Navarra (CIIF) https://www.iese.edu/media/research/pdfs/DI-0524-E.pdf
Accessed 2025-12-14

Economic Profit Calculator

Results

What It Means?

What is Economic Profit?

Formula

Example

How to Use the Economic Profit Calculator

Choose your input mode

Enter operating profit

Enter Invested Capital and WACC

Read the Results panel

Stress-test with Scenarios and share outputs

Frequently Asked Questions

Methodology & Sources

Bibliography

Other Calculators in Corporate Finance & Analysis

EVA (Economic Value Added) Calculator

Return on Invested Capital (ROIC) Calculator

Weighted Average Cost of Capital (WACC) Calculator

Net Operating Profit After Tax (NOPAT) Calculator

Invested Capital Calculator