Scribd
Upload
9 views9 pages

Economic Value Added (EVA) Analysis

The document provides an example of calculating Economic Value Added (EVA). It shows the capital employed, revenues, costs of capital, traditional net income, and EVA for three companies. EVA measures the profit generated above the minimum required return on capital by deducting the cost of capital from net income.

Uploaded by

Pawan Singh
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLS, PDF, TXT or read online on Scribd
9 views9 pages

Economic Value Added (EVA) Analysis

The document provides an example of calculating Economic Value Added (EVA). It shows the capital employed, revenues, costs of capital, traditional net income, and EVA for three companies. EVA measures the profit generated above the minimum required return on capital by deducting the cost of capital from net income.

Uploaded by

Pawan Singh
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLS, PDF, TXT or read online on Scribd

Economic Value Added (EVA) Example

Capital Rs. 75.00

Indian Rs. 72.60


Overseas Rs. 8.10

WACC 25.00%

Traditional Net Income

Revenue Rs. 80.70


Income Rs. 80.70
Deduct capital Rs. 75.00 Return on Capital 7.60%
Net Income Rs. 5.70

EVA

Capital employed Rs. 75.00


x Cost of Capital 25.00%
Cost of Capital at Market Value Rs. 18.75

Net Income Rs. 5.70


- Cost of Capital Rs. 18.75
Economic Value Added -Rs. 13.05
cost PAT wacc
ett 90 95 1.055556 5.56%
RR 75 50 0.666667
AP 75 58 0.773333
Economic Value Added (EVA) Example
Investment Rs. 90.00
Indian Rs. 110.00
Overseas Rs. 25.00
Rs. 135.00
WACC Rs. 0.25
Traditional Net Income

Revenue Rs. 135.00


Total Rs. 135.00
Deduct investment Rs. 90.00 Return on Capital 50.00%
Net Income Rs. 45.00
EVA
Market Value of Capital Rs. 90.00
x Cost of Capital Rs. 0.25
Dollar Cost of Capital at Market Value Rs. 22.50
Net Income Rs. 45.00
- Cost of Capital Rs. 22.50
Economic Value Added Rs. 22.50
Economic Value Added (EVA) Example
Investment Rs. 65.00
Indian Rs. 111.10
Overseas Rs. 35.00
Rs. 146.10

Cost of capital 25%

Traditional Net Income

Revenue Rs. 146.10


Total Rs. 146.10
Deduct investment Rs. 65.00 Return on Capital 124.77%
Net Income Rs. 81.10
EVA
Market Value of Capital Rs. 65.00
x Cost of Capital 25%
Cost of Capital at Market Value Rs. 16.25

Net Income Rs. 81.10


- Cost of Capital Rs. 16.25
Economic Value Added Rs. 64.85
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
Economic Value Added (EVA) Example

Capital Rs. 75.00

Indian Rs. 67.65


Overseas Rs. 14.85

WACC 25.00%

Traditional Net Income

Revenue Rs. 82.50


Income Rs. 82.50
Deduct capital Rs. 75.00 Return on Capital 10.00%
Net Income Rs. 7.50

EVA

Capital employed Rs. 75.00


x Cost of Capital 25.00%
Cost of Capital at Market Value Rs. 18.75

Net Income Rs. 7.50


- Cost of Capital Rs. 18.75
Economic Value Added -Rs. 11.25
cost PAT wacc
ett 90 95 1.055556 5.56%
RR 75 50 0.666667
AP 75 58 0.773333
Economic Value Added (EVA) Example

Capital Rs. 50.00

Indian Rs. 50.40


Overseas Rs. 13.50

WACC 25.00%

Traditional Net Income

Revenue Rs. 63.90


Income Rs. 63.90
Deduct capital Rs. 50.00 Return on Capital 27.80%
Net Income Rs. 13.90

EVA

Capital employed Rs. 50.00


x Cost of Capital 25.00%
Cost of Capital at Market Value Rs. 12.50

Net Income Rs. 13.90


- Cost of Capital Rs. 12.50
Economic Value Added Rs. 1.40
cost PAT wacc
ett 90 95 1.055556 5.56%
RR 75 50 0.666667
AP 75 58 0.773333

You might also like