The formula to calculate Economic Value Added (EVA) is:
\[ \text{EVA} = \text{NOPAT} - (\text{Invested capital} \times \text{WACC}) \]
Economic Value Added (EVA) is a measure of a company's financial performance. It is calculated by subtracting the finance charge (cost of capital) from the net operating profit after tax (NOPAT). EVA indicates whether the company generates value above the required minimum return.
Let's assume the following:
To calculate EVA:
\[ \text{EVA} = 750,000 - (1,600,000 \times 0.17) = 478,000 \]
Therefore, the Economic Value Added (EVA) is $478,000, indicating that the company has generated a return above its cost of capital.
