Question 3 - Part b

In this lesson

1. 0:00 Introduction to EVA calculation
2. 0:14 Understanding NOPAT and interest adjustment
3. 1:02 Calculating NOPAT step by step
4. 2:09 Adjusting for non-cash and long-term items
5. 4:00 Capital employed at start of year
6. 5:15 Adjusting opening capital for prior year items
7. 6:25 Computing the capital charge
8. 7:03 Final EVA result and interpretation
9. 8:19 Concluding on value creation and shareholder impact

About this lesson

This video walks you through a worked example, showing you how to identify and adjust for non-cash items like provisions and depreciation, handle capital adjustments from prior years, and interpret your result. This technique is essential for Strategic Business Leader (SBL) and Advanced Performance Management (APM) papers, where EVA analysis demonstrates whether a business is creating shareholder value above its cost of capital. By following this step-by-step approach, you'll understand why each adjustment matters and how to spot common mistakes—particularly the difference between adjustments to Nopat versus adjustments to opening capital. The example demonstrates that even an EVA result of zero has meaning: it tells you the business is recovering its capital charge but not creating additional value. Mastering this calculation gives you confidence to handle EVA questions in your exam and apply value-based management thinking to real business scenarios.

Duration: 9m