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Economic value added

In the field of finance, economic value added (or EVA) is a way to determine the value created for the shareholders of a company.

The basic formula is :


Where :
ROCE = Return On Capital Employed
WACC = Weighted average cost of capital

Shareholders of the company will receive a positive value added when the return from the equity employed in the business operations is greater than the cost of that capital. Any value obtained by employees of the company or by product users is not included in the calculations.