# Economic Value Added (EVA) Worksheet

## Overview
Economic Value Added (EVA) measures the value a company generates from invested capital above the cost of that capital. It helps determine whether a business is truly creating shareholder value. EVA = NOPAT - (Invested Capital × WACC)

## Basic EVA Calculation

### Net Operating Profit After Tax (NOPAT)
**Starting with Operating Income:**
Operating Income (EBIT): $_____________
Less: Cash Operating Taxes: $_____________
= NOPAT: $_____________

**Adjustments to NOPAT:**
- [ ] Add: R&D expenses (if capitalized): $_____________
- [ ] Add: Marketing expenses (if capitalized): $_____________
- [ ] Add: Goodwill amortization: $_____________
- [ ] Add: Operating lease interest: $_____________
- [ ] Less: Non-cash charges reversed: $_____________
- [ ] Other adjustments: $_____________

**Adjusted NOPAT:** $_____________

### Invested Capital Calculation
**Book Value Approach:**
Total Assets: $_____________
Less: Non-interest bearing current liabilities: $_____________
Less: Excess cash: $_____________
= Invested Capital: $_____________

**Adjustments to Invested Capital:**
- [ ] Add: Accumulated goodwill amortization: $_____________
- [ ] Add: Capitalized R&D: $_____________
- [ ] Add: Capitalized marketing: $_____________
- [ ] Add: Present value of operating leases: $_____________
- [ ] Add: LIFO reserve: $_____________
- [ ] Add: Bad debt reserve: $_____________
- [ ] Other adjustments: $_____________

**Adjusted Invested Capital:** $_____________

### Weighted Average Cost of Capital (WACC)
**Capital Structure:**
Market Value of Equity: $_____________
Market Value of Debt: $_____________
Total Market Value: $_____________

**Cost Components:**
Cost of Equity: _____%
After-tax Cost of Debt: _____%

**WACC Calculation:**
WACC = (E/V × Re) + (D/V × Rd × (1-T))
WACC = _____% 

### EVA Calculation
EVA = NOPAT - (Invested Capital × WACC)
EVA = $_____________ - ($_____________ × _____%)
**EVA = $_____________**

## Historical EVA Analysis

### Multi-Year EVA Trend
| Year | NOPAT | Invested Capital | WACC | Capital Charge | EVA | EVA Growth |
|------|-------|------------------|------|----------------|-----|------------|
| 20__ | $ | $ | % | $ | $ | - |
| 20__ | $ | $ | % | $ | $ | % |
| 20__ | $ | $ | % | $ | $ | % |
| 20__ | $ | $ | % | $ | $ | % |
| Current | $ | $ | % | $ | $ | % |

### EVA Drivers Analysis
**Return on Invested Capital (ROIC):**
ROIC = NOPAT / Invested Capital = _____% 
Spread (ROIC - WACC) = _____%

**Value Creation Assessment:**
- [ ] EVA Positive (Creating Value)
- [ ] EVA Negative (Destroying Value)
- [ ] EVA Improving
- [ ] EVA Declining

## Business Unit/Segment EVA

### Segment Analysis
| Business Unit | NOPAT | Invested Capital | WACC | EVA | ROIC | Value Creation |
|---------------|-------|------------------|------|-----|------|----------------|
| | $ | $ | % | $ | % | Positive/Negative |
| | $ | $ | % | $ | % | Positive/Negative |
| | $ | $ | % | $ | % | Positive/Negative |
| | $ | $ | % | $ | % | Positive/Negative |

### Capital Allocation Insights
**High EVA Units (Invest More):**
1. _________________________
2. _________________________

**Low/Negative EVA Units (Restructure/Divest):**
1. _________________________
2. _________________________

## EVA Improvement Strategies

### NOPAT Enhancement
**Revenue Growth Opportunities:**
- [ ] Market expansion: Impact $_____________
- [ ] Product innovation: Impact $_____________
- [ ] Pricing optimization: Impact $_____________
- [ ] Customer retention: Impact $_____________

**Operating Efficiency:**
- [ ] Cost reduction: Impact $_____________
- [ ] Process improvement: Impact $_____________
- [ ] Automation: Impact $_____________
- [ ] Outsourcing: Impact $_____________

### Capital Efficiency
**Working Capital Optimization:**
- Inventory reduction potential: $_____________
- Receivables improvement: $_____________
- Payables optimization: $_____________
- Total working capital reduction: $_____________

**Fixed Asset Management:**
- [ ] Asset utilization improvement
- [ ] Disposal of underperforming assets
- [ ] Sale and leaseback opportunities
- [ ] Shared services/assets

### Cost of Capital Reduction
**Capital Structure Optimization:**
- Optimal debt ratio: _____%
- Potential WACC reduction: _____basis points
- Annual savings: $_____________

**Risk Management:**
- [ ] Operational risk reduction
- [ ] Financial risk management
- [ ] Diversification benefits
- [ ] Credit rating improvement

## Project Evaluation Using EVA

### New Investment Analysis
| Project | Initial Investment | Annual NOPAT | Project Life | NPV of EVA | Accept? |
|---------|-------------------|--------------|--------------|------------|---------|
| | $ | $ | years | $ | Yes/No |
| | $ | $ | years | $ | Yes/No |
| | $ | $ | years | $ | Yes/No |

### EVA-Based Decision Criteria
**Project Acceptance Rule:**
Accept if: NPV of EVA > 0
Or if: Project ROIC > WACC

## Performance Measurement & Incentives

### EVA-Based Metrics
**Management Performance:**
- EVA improvement target: $_____________
- EVA margin (EVA/Sales): _____%
- EVA per employee: $_____________
- EVA growth rate: _____%

### Incentive Design
**Bonus Formula:**
Base Bonus: $_____________
EVA Improvement Multiplier: _____x
Target EVA: $_____________
Actual EVA: $_____________
**Calculated Bonus:** $_____________

## Benchmarking

### Industry Comparison
| Company | EVA | ROIC | WACC | EVA Margin | Market Cap/IC |
|---------|-----|------|------|------------|---------------|
| Your Company | $ | % | % | % | x |
| Competitor 1 | $ | % | % | % | x |
| Competitor 2 | $ | % | % | % | x |
| Industry Avg | $ | % | % | % | x |

### Best Practices Identified
1. _________________________________________________________________
2. _________________________________________________________________
3. _________________________________________________________________

## Action Plan

### Quick Wins (0-3 months)
- [ ] Working capital reduction: EVA impact $_____________
- [ ] Eliminate negative EVA projects: EVA impact $_____________
- [ ] Operating efficiency gains: EVA impact $_____________

### Medium-term Initiatives (3-12 months)
- [ ] Capital structure optimization: EVA impact $_____________
- [ ] Business unit restructuring: EVA impact $_____________
- [ ] Investment in high-ROIC projects: EVA impact $_____________

### Strategic Transformation (12+ months)
- [ ] Portfolio optimization: EVA impact $_____________
- [ ] Business model innovation: EVA impact $_____________
- [ ] M&A based on EVA creation: EVA impact $_____________

## Monitoring Dashboard

### Key EVA Indicators
- [ ] Monthly EVA trend
- [ ] EVA by business unit
- [ ] ROIC vs WACC spread
- [ ] Capital efficiency ratios
- [ ] EVA per share

### Review Frequency
- EVA calculation: Monthly/Quarterly
- Driver analysis: Quarterly
- Strategy review: Semi-annually
- Incentive calibration: Annually

## Example Application

**Company:** Manufacturing Conglomerate
**Situation:** Multiple business units with varying performance

**Analysis Results:**
- Unit A: EVA = $50M (ROIC 18%, WACC 10%) → Expand
- Unit B: EVA = -$10M (ROIC 7%, WACC 10%) → Restructure
- Unit C: EVA = $5M (ROIC 11%, WACC 10%) → Optimize

**Actions Taken:**
- Doubled investment in Unit A
- Divested 40% of Unit B assets
- Improved Unit C working capital by 25%

**Result:** Total EVA improved from $45M to $85M in 18 months

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*Date Completed:* _____________
*Completed By:* _____________
*Next Review Date:* _____________