Please clarify what is the right approach for EVA
Is it EBIT(1-tax) or EBIT(1-tax)+ Interes(net of tax)
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Economic value added(eva)
Replies (7)
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).
The formula for calculating EVA is as follows:
= Net Operating Profit After Taxes (NOPAT) - (Capital * Cost of Capital)
Sorry I wanted to know how to calculate NOPAT
Is it EBIT(1-tax) or EBIT(1-tax)+ Interes(net of tax)
NOPAT = EBIT × (1 − Tax Rate)
Thanks. But then when to use that net of tax formula.
NOPAT=EBIT(1-tax) or
NOPAT=PAT+Interest(Net of Tax)..
Hope u r doubt clarified..
Ya thank you people.
ya correct
as EBIT itself inclues interest component then in that cas no need to again consider int.(1-tax)
but if u r taking PAT then u ll have to add int.(net of tax)
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