# EVA = EP?!?

The heck…is economic value add the same thing as economic profit? It seems like it is…which is NOPAT - \$WACC Ecnomic income however is = Cash flow - economic depreciation Economic depreciation = beg MV - end MV Residual Income = NI - equity charge (equity charge = r X beg BV) I think i may finally have all these different income calculations straight…wow… Is this right guys??

EVA = NOPAT - WACC - correct Not sure about economic income or depr, dont know if tis is being tested, but dont remember too much in L2 books RI = NI - equity charge is def right

You are right about Economic Income as well. Economic Income=After Tax Cash Flows - Economic Depreciation (equation for which you just listed above).

EVA and EP are the same.

Thanks guys that was helpful… economic income = AFTER TAX cash flow - economic depreciation. I think writing this out on a blog helps my memory. thanks again!!

You can also do ATCF + change in market value if that seems more intuitive.

What is the formula for ATCF? Is there any other name for ATCF? What is accounting income?

CFAT=(S-C-D)*(1-t)+D = (S-C)*(1-t)+tD ATCF is CFAT. accounting income is NI, I think.

Economic Value Added = Economic Profit = EBIT (1-T) x [\$WACC (debt and equity capital base multiplied by WACC)] Economic Income = WACC x NPV(CF) = ATCF -[Economic Depreciation (PV @ Year (x) - PV @ Year (x-1)) or Beginning Market value minus Ending Market Value] Accounting Income = Net Income MVA = Market Value of Debt and Equity - Book Value of Debt and Equity

• 1 nice summary. sebrock Wrote: ------------------------------------------------------- > Economic Value Added = Economic Profit = EBIT > (1-T) x [\$WACC (debt and equity capital base > multiplied by WACC)] > > Economic Income = WACC x NPV(CF) = ATCF - > > Accounting Income = Net Income > > MVA = Market Value of Debt and Equity - Book Value > of Debt and Equity

Thanks, that answers my question in another post. “x” is “-” in Economic Profit formula?

yea… sebrock had a little typo there, but you get the idea.

where is the typo??

How is ATCF linked to EBIT(1-t)?

EVA = EBIT (1-T) - [\$WACC (debt and equity capital base multiplied by WACC)]

Economic Income = WACC x NPV(CF) = ATCF -[Economic Depreciation (PV @ Year (x) - PV @ Year (x-1)) or Beginning Market value minus Ending Market Value] whats wrong with this formula?? i don’t see where the mentionted typo is!

That’s because I have modified it.

ATCF=EBIT(1-t)+D or =NI+D+int(1-t) right?

eva is the registered stern stewart trademark. ep is exactly the same but comes from the boston consulting group i think… (but you can correct me if its not from the boston consulting group.)

ATCF = EBIT(1 - TR) + D ATCF = (S - C - D)(1 - TR) + DT