If NOPAT is 10,500,000 and the capital borrowed is 10 million at 8%, what is the calculated EVP?

To calculate the Economic Value Added (EVA), we start with the formula:

EVA = NOPAT - (Capital * Cost of Capital)

Where:

• NOPAT (Net Operating Profit After Tax) is given as 10,500,000.

• Capital borrowed is 10 million.

• The cost of capital is 8%, or 0.08 in decimal form.

Now, we can calculate the capital charge, which is the amount of capital multiplied by its cost:

Capital Charge = Capital * Cost of Capital

Capital Charge = 10,000,000 * 0.08 = 800,000

Now, we can substitute these values into the EVA formula:

EVA = NOPAT - Capital Charge

EVA = 10,500,000 - 800,000 = 9,700,000

Thus, the calculated Economic Value Added is 9,700,000. This indicates that the business is generating sufficient profit after accounting for the cost of capital, reflecting positive economic performance.