Financial
ROIC, NOPAT, and Economic Value Added (EVA) formulas
Calculate Net Operating Profit After Tax (NOPAT), Operating Invested Capital, ROIC %, and dollar Economic Value Added above WACC.
Compare modeled operating return with a capital charge
This simplified example estimates NOPAT as EBIT times one minus an assumed operating tax rate, and invested capital as book debt plus book equity less specified excess non-operating cash.
With EBIT 120, tax 25%, debt 250, equity 300 and excess cash 50, NOPAT is 90 and invested capital 500. ROIC is 18%; a 10% capital charge leaves modeled residual income 40. Monetary inputs are in millions.
Align annual profit and WACC with a consistently measured beginning or average invested-capital base. Adjustments for leases, goodwill, R&D, taxes and non-operating items may be needed. A historical spread alone does not establish the value of future growth or shareholder returns.
| Value-Creation Metric ($M) | Formula | Sample Result |
|---|---|---|
| NOPAT ($120M EBIT @ 25% Tax) | =A2 * (1 - B2) | $90.00M |
| Invested Capital ($250 Debt + $300 Eq - $50 Cash) | =C2 + D2 - E2 | $500.00M |
| ROIC (NOPAT / Invested Capital) | =(A2 * (1 - B2)) / (C2 + D2 - E2) | 18.00% |
| Economic Value Added (WACC = 10%) | =NOPAT - InvestedCap * F2 | +$40.00M (+8.0% ROIC-WACC spread) |
ROIC (Return on Invested Capital) and Economic Value Added (EVA) formulas
Subtract only the specified excess non-operating cash, not necessarily all cash. Use complete numeric inputs and a positive invested-capital denominator.
=IF(OR(COUNT(A2:F2)<>6,B2<0,B2>1,C2+D2-E2<=0,F2<0),"Invalid capital inputs",ROUND((A2 * (1 - B2)) / (C2 + D2 - E2), 4))Dollar Economic Value Added (EVA = NOPAT - Capital Charge)
Positive modeled residual income means assumed NOPAT exceeds the assumed capital charge under this simplified definition.
=IF(OR(COUNT(A2:F2)<>6,B2<0,B2>1,C2+D2-E2<=0,F2<0),"Invalid capital inputs",ROUND((A2 * (1 - B2)) - (C2 + D2 - E2) * F2, 2))Try the example
Use the original values or change them to test your understanding.