How do I calculate Economic Value Added (EVA)?
An example of an AI chatbot conversation about calculating Economic Value Added (EVA).
What is Economic Value Added (EVA)?
Economic Value Added (EVA) is a measure of a company's financial performance that shows the value created beyond the required return of its shareholders.
How do I calculate EVA?
To calculate EVA, use the formula: EVA = Net Operating Profit After Taxes (NOPAT) - (Capital * Cost of Capital).
Can you give me an example of calculating EVA?
Sure! If a company has a NOPAT of $1 million, capital of $5 million, and a cost of capital of 10%, EVA would be: $1M - ($5M * 10%) = $1M - $500K = $500K.
What does a positive EVA indicate?
A positive EVA indicates that the company is generating value over and above the cost of capital, which is a good sign for investors.
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