Question
A company has a Net Operating Profit After Tax (NOPAT)
of ₹60 lakh. Its total capital employed is ₹400 lakh and Weighted Average Cost of Capital (WACC) is 12%. Compute the Economic Value Added (EVA) and interpret its significance.Solution
EVA = NOPAT - (Capital Employed × WACC) = 60 - (400 × 12%) = 60 - 48 = ₹12 lakh. A positive EVA indicates value creation.
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