Please clarify what is the right approach for EVA
Is it EBIT(1-tax) or EBIT(1-tax)+ Interes(net of tax)
7 Replies
Megha Choudhary
(Management Trainee)
(541 Points)
Replied 18 March 2016
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)
rima
(ca)
(142 Points)
Replied 18 March 2016
Sorry I wanted to know how to calculate NOPAT
Is it EBIT(1-tax) or EBIT(1-tax)+ Interes(net of tax)
Megha Choudhary
(Management Trainee)
(541 Points)
Replied 18 March 2016
NOPAT = EBIT × (1 − Tax Rate)
Rajagopal
(Accountant)
(110 Points)
Replied 19 March 2016
NOPAT=EBIT(1-tax) or
NOPAT=PAT+Interest(Net of Tax)..
Hope u r doubt clarified..
Jacky
(Accountant & CA Final Student)
(320 Points)
Replied 25 March 2016
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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