Economic value added

Economic value added (EVA) is a measure of a company's financial performance based on the residual wealth calculated by deducting cost of capital from its operating profit (adjusted for taxes on a cash basis). (Also referred to as "economic profit".)

The formula for calculating EVA is as follows:

= Net Operating Profit After Taxes (NOPAT) - (Capital * Cost of Capital)

Rightly said by Mr. Amit Kanuga,

 EVA = NOPAT - Cost of Capital.

 But it seems your query was regading the formula of NOPAT,

The Correct Formula for NOPAT is either of the following

• EBIT(1-T)
• PAT + Interest (1-T)

And  for your second query about which one is a better approac, Any of the above tow methods of Calculation will give same answer.

Originally posted by : Saliq Ansari
	Rightly said by Mr. Amit Kanuga,  EVA = NOPAT - Cost of Capital.  But it seems your query was regading the formula of NOPAT, The Correct Formula for NOPAT is either of the following EBIT(1-T) PAT + Interest (1-T) And  for your second query about which one is a better approac, Any of the above tow methods of Calculation will give same answer.

Thanks for ur support for my answer

yes ur approach for the same is good one.