economic value added Definitions (2) 1. EVA.

The monetary value of an entity at the end of an time period minus the monetary value of that same entity at the beginning of that time period. 2. For a company, after-tax earnings minus the opportunity cost of capital. As with any other entity, economic value added essentially measures how much more valuable a company has become during a given time period.

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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) Investopedia Says: This measure was devised by Stern Stewart & Co. Economic value added attempts to capture the true economic profit of a company.

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Definition of 'Economic Value Added - EVA'

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)

Investopedia explains 'Economic Value Added - EVA'

This measure was devised by Stern Stewart & Co. Economic value added attempts to capture the true economic profit of a company
Read more: http://www.investopedia.com/terms/e/eva.asp#ixzz1uabhDNwN n present scenario the Economic Value Added(EVA) is becoming popular. Economic Value Added definition: EVA (Economic Value Added) is basically the excess amount left on after making a proper charge for the capital invested

in the business. It different ways economic value added calculation can be done. They are, Different types of Economic Value Added (EVA) Formula are: 1. EVA = NOPAT - C* x CAPITAL. 2. EVA = CAPITAL (r-c*) 3.EVA = [PAT + INT (1-t)] - C* CAPITAL 4.EVA = PAT- Kc EQUITY Where, NOPAT = Net Operating Profit After Tax. C*= Cost of Capital CAPITAL= Economic book value of the capital invested in the firm. r= return on capital (NOPAT/CAPITAL) PAT=Profit After Tax. INT+ interest expense of the firm. t=Marginal tax rate of the firm. Kc= Cost of equity. EQUITY= Equity utilized in the firm. Important Features and Advantages of EVA Approach:

It acts as performance measure which is linked to share holder value creation in all directions. It is useful in providing business knowledge to everyone. It is an efficient method for communicating to investors. It transforms the accounting information into economic quality which can be easily understood by non financial managers. It is useful in evaluating Net Present Value(NPV) of projects in capital budgeting which is contradictory to IRR. Instead of writing the value of firm in terms of discounted cash flow, it can be expressed in terms of EVA of projects.