Answer Posted / soumya
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)
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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