Economic Profit Calculator

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 mat...

Economic Value Added (EVA) Calculator

Compute EVA = NOPAT − (Invested Capital × WACC). Enter NOPAT directly or derive it from EBIT and tax. Optionally average invested capital using beginning and ending values.

Basic (NOPAT)EBIT → NOPAT

Average of beginning and ending invested capital smooths intra‑period changes.

$

Net Operating Profit After Tax — after‑tax operating income, excluding financing effects.

$

If not averaging, provide invested capital for the period.

$

Invested capital at the start of the period.

$

Invested capital at the end of the period.

$

Earnings before interest and taxes for the period.

%

Effective tax rate applied to EBIT to estimate after‑tax operating profit (NOPAT).

$

If not averaging, provide invested capital for the period.

%

Weighted Average Cost of Capital — annual percent rate.

Scenarios
Example profiles: Stable Company / High‑Growth Company / Leveraged Company
Stable CompanyHigh‑Growth CompanyLeveraged Company

Results

  • EVA$
  • EVA Margin— %
  • Capital Charge$
  • NOPAT$
  • Invested Capital$
  • Category—
  • Method Used—

Enter your inputs above to calculate the results.

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

Economic Profit = NOPAT-(WACC × Invested Capital)
Capital Charge = WACC × Invested Capital
Economic Profit Spread = Economic Profit / Invested Capital × 100% = (NOPAT / Invested Capital-WACC) × 100%

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 div $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 div $1,000,000 = 14.0%

How to Use the Economic Profit Calculator

Frequently Asked Questions

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.

Sources & Methodology