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Net operating profit after-tax (NOPAT) is the profit after subtracting cost of sales, operating expenses, taxes and other adjustments from revenues.

The capital charge is the required, or minimum, rate of return necessary to compensate all investors, for the capital they have invested in the company. Capital is net assets (total assets minus current liabilities) and includes accounts receivable, inventory, property, plant and equipment less accounts payable and accruals. SPX's cost of capital for 1996 is 11%. To calculate the capital charge, multiply capital by 11%.

EVA or economic value added, is the economic profit left after subtracting the cost of all capital employed in the business.
EVA = NOPAT - Capital Charge.
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EVA is a registered trademark of Stern Stewart & Co.
Copyright © SPX Corporation 1996
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