Create a new account  It's simple, and free.  Economic Value
Added; A Way of Measuring a Firm's Profitability  EVA is a way
of measuring a firm's profitability. EVA is NOPAT minus a charge
for all capital invested in the business (Byrne 1). A more
intuitive way to think of EVA is as the difference between a
firms NOPAT and its total cost of capital (Kramer & Pushner 40).
Stern Staurt's numerical definition of EVA is calculated for any
year by multiplying a firm's economic book value of capital © at
the beginning of the year by the spread between its return on
capital ® and its cost of capital (K): EVA=(Rt-Kt)*Ct-1 (Kramer
&Pushner 41). EVA is a notion of residual income (Ehrbar Xi).
Investors demand a rate of return proportional to the amount of
risk incurred. Operating profits determine residual income by
plotting them against the required rate of return, a product of
both debt and equity. EVA takes into account all capital
invested. Peter Druker says in his Harvard Business Review
article, "EVA is based on