This artikel discuss about EVA.Economic Value Added (EVA) is the result of reduction in the total capital cost of operating profit after tax. Own capital cost in the form of cost of debt and the cost of equity.

Economic Value Added can be formulated as follows:

EVA = NOPAT – (Capital xc) or EVA = (rc) x Capital


* NOPAT is Net Operating Profit After Tax, the net profit (Net Income After Tax) plus interest after tax.
* C is the cost of capital is the cost of borrowing and interest costs equitas used to generate the NOPAT (Net Operating profit After Tax) and calculated the weighted average (Weighted Average Cost of Capital).
* R is a capital reversal rate (rate of return), which is NOPAT divided by Capital.
* Capital is the amount of funds available for companies to finance the company.

As for the steps performed in calculating EVA (Economic
Value Added) in more detail as follows (Mike Roussana, 1997):

1. Counting the cost of debt and the cost of equity
2. Calculating the capital structure of balance sheets
3. Calculating NOPAT
4. Calculating the rate of return (r)
5. Counting the cost of capital weighted average (C)
6. Calculating EVA (Economic Value Added)

EVA is similar to ordinary profit calculation but with important differences in the 2 EVA consider the cost of all capital and not blocked by a set of GAAP in the company’s financial statements.

Net income reported in the company’s income statement only mempetimbangkan most evident at the cost of capital as interest-which ignores the cost of equity finance.

Financial accounting does not calculate finance charges received by shareholders because the opportunity cost that can not be measured directly. But the reality is not so.

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