Economic Value Added Spreadsheet

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									ECONOMIC VALUE ADDED


Company tax rate                                    30%
Common stock outstanding                          90000
Market price per stock             $              20.00


                                   INCOME STATEMENT

EBIT                               $        1,000,000.00
Interest on debt                   $          220,000.00
Interest on preferred stock        $           84,000.00
Profit before taxes                $          696,000.00
Taxes                              $          208,800.00
Net income                         $          487,200.00
Tax adjustment on interest         $          212,800.00
Income adjusted for the tax        $          700,000.00

Weighted Average Cost of Capital                 11.93%

                                   CAPITAL STRUCTURE
                                   Amount                              Cost of Capital   Average cost
Common stock                       $        1,800,000.00                          18%      7.200%
Preferred stock                    $          700,000.00                          12%      1.307%
Debt                               $        2,000,000.00                          11%      3.422%
Total capital                      $        4,500,000.00

                                                           ECONOMIC VALUE ADDED
                                                                   $     163,200.00
                                               HOW TO CALCULATE ECONOMIC VALUE ADDED (EVA)


What is Economic Value Added (EVA)?

Economic Value Added is a calculation used to determine a company's economic profit, based on net operating profit after tax (NOPAT).
In this calculation, NOPAT is adjusted for the company's cost of investment in capital.

EVA is primarily used by companies to manage overall profitability and to evaluate capital investment decisions.




How is Economic Value Added calculated?


Step 1 - Calculate Net Operating Profit after Tax (NOPAT)

Refer to the Income Statement for NOPAT calculation and to update values.

Income Statement                                         Year 1            Year 2             Year 3             Year 4            Year 5
Sales                                         $      8,529,880    $   10,321,155     $   11,198,453    $    11,982,345    $   12,701,285
- Cost of Goods Sold                          $     (6,260,932)   $   (7,575,728)    $   (8,219,664)   $    (8,795,041)   $   (9,322,743)
- Operating Expenses                          $     (1,219,115)   $   (1,335,150)    $   (1,370,529)   $    (1,406,071)   $   (1,442,016)
- Taxes                                       $       (301,523)   $     (434,524)    $     (540,380)   $      (695,531)   $     (770,937)
= NOPAT                                       $        748,310    $      975,753     $    1,067,880    $     1,085,702    $    1,165,589


Step 2 - Calculate Capital Charges

Refer to the Balance Sheet for Capital Charges calculation and to update values.

Invested Capital (Including Stock and Debt) x the Weighted Average Cost of Capital

Balance Sheet                                           Year 1             Year 2             Year 3             Year 4            Year 5
Common Stock                                  $       800,000     $      800,000     $      800,000    $       800,000    $      800,000
+ Preferred Stock                             $       200,000     $      200,000     $      200,000    $       200,000    $      200,000
+ Debt                                        $     3,061,192     $    2,764,787     $    2,447,376    $     2,107,398    $    1,743,173
=Total Capital                                $     4,061,192     $    3,764,787     $    3,447,376    $     3,107,398    $    2,743,173
                                     HOW TO CALCULATE ECONOMIC VALUE ADDED (EVA)


Cost of Capital
Common Stock                                 12%           12%            12%            12%            12%
Preferred Stock                              10%           10%            10%            10%            10%
Debt                                          6%            6%             6%             6%             6%

Weighted Average Cost of Capital
Common Stock                                  2%            3%             3%             3%             3%
+ Preferred Stock                             0%            1%             1%             1%             1%
+ Debt                                        5%            4%             4%             4%             4%
= Total Cost of Capital                       7%            8%             8%             8%             8%


Step 3 - EVA = NOPAT - CAPITAL CHARGES

NOPAT                                $    748,310 $     975,753 $    1,067,880 $    1,085,702 $    1,165,589
- CAPITAL CHARGES                    $   (304,339) $   (284,781) $    (263,774) $    (241,207) $    (216,961)
= ECONOMIC VALUE ADDED (EVA)         $    443,971 $     690,973 $      804,106 $      844,495 $      948,628
Sales Growth Rate                                             21%                9%
Tax Rate                                     35%              35%               37%




Five Year Income Statement                 Year 1           Year 2            Year 3
Sales                               $   8,529,880   $   10,321,155   $    11,198,453
COGS                                $   6,260,932   $    7,575,728   $     8,219,664
Gross Profit                        $   2,268,948   $    2,745,427   $     2,978,788

Operating Expenses
Selling Expenses
Marketing Salaries                  $        -      $         -      $          -
Marketing & Advertising             $     35,000    $      35,000    $       36,050

General & Administrative Expenses
Management Salaries                 $    300,000    $     300,000    $      309,000
Staff Salaries                      $    210,000    $     210,000    $      216,300
Benefits                            $    102,000    $     102,000    $      105,060
Payroll Taxes                       $     51,000    $      51,000    $       52,530
Insurance                           $    100,100    $     100,100    $      100,100
Depreciation                        $     47,700    $      47,700    $       47,700
Utilities                           $    148,633    $     153,092    $      157,685
Telephone                           $     25,000    $      25,750    $       26,523
Professional Fees                   $     12,000    $      12,000    $       12,000
Repairs & Maintenance               $      5,004    $       5,004    $        5,004
Office Supplies etc.                $     75,000    $      77,250    $       79,568
Printing                            $      5,700    $       5,871    $        6,047
Bank & Credit Card Fees             $     20,004    $      95,409    $      101,988
Other G & A Expenses                $     81,974    $     114,974    $      114,974
Total Operating Expenses            $   1,219,115 $     1,335,150 $       1,370,529

Operating Profit (EBIT)             $   1,049,833 $     1,410,277 $       1,608,260

Tax                                 $    301,523    $     434,524    $      540,380


NOPAT                               $ 748,310       $ 975,753        $ 1,067,880

Interest Expense                    $    188,339    $     168,781    $      147,774
Total Other Income/Expense          $    188,339 $        168,781 $         147,774

Net Income Before Tax (EBIT)        $    559,971 $        806,973 $         920,106

Net Income                          $    258,448    $     372,449    $      379,726
            7%                6%
           42%               42%




         Year 4            Year 5
$    11,982,345   $    12,701,285
$     8,795,041   $     9,322,743
$     3,187,304   $     3,378,542




$          -      $          -
$       37,132    $       38,245


$      318,270    $      327,818
$      222,789    $      229,473
$      108,212    $      111,458
$       54,106    $       55,729
$      100,100    $      100,100
$       47,700    $       47,700
$      162,416    $      167,288
$       27,318    $       28,138
$       12,000    $       12,000
$        5,004    $        5,004
$       81,955    $       84,413
$        6,229    $        6,415
$      107,868    $      113,260
$      114,974    $      114,974
$    1,406,071 $       1,442,016

$    1,781,233 $       1,936,526

$      695,531    $      770,937


$ 1,085,702       $ 1,165,589

$      125,207    $      100,961
$      125,207 $         100,961

$      960,495 $       1,064,628

$      264,964    $      293,690
FIVE YEAR BALANCE SHEET                             Year 1        Year 2          Year 3
Assets
Current Assets
Cash and Cash Equivalents                    $ 1,455,447 $ 1,744,936       $   1,910,603
Inventories                                  $ 592,626 $ 573,919           $     622,702
Prepaid Expenses                             $       -   $       -         $         -
Total Current Assets                         $ 2,048,073 $ 2,318,855       $   2,533,305
Fixed Assets
Refrigeration & Shelving                     $     424,000   $ 424,000 $         424,000
Furniture and Fixtures                       $     127,000   $ 127,000 $         127,000
Computers & Registers                        $      51,000   $    51,000 $        51,000
Building                                     $   2,500,000   $ 2,500,000 $     2,500,000
Start-up Costs                               $         -     $       -   $           -
Land                                         $     134,500   $ 134,500 $         134,500
Total Fixed Assets                           $   3,236,500   $ 3,236,500 $     3,236,500
Less Accumulated Depreciation/Amortization   $     148,633   $ 297,267 $         445,900
Furniture Fixtures, Fleet, Net               $   3,087,867   $ 2,939,233 $     2,790,600
Other Assets                                 $         -
Total Assets                                 $   5,135,939   $ 5,258,088 $     5,323,905
Liabilities & Stockholders' Equity
Current Liabilities
Accounts Payable                             $    681,520    $ 660,007     $     716,107
Notes Payable                                $    188,339    $ 168,781     $     147,774
Income taxes payable                         $     62,441    $ 265,617     $     350,025
Total Current Liabilities                    $    932,300    $ 1,094,404   $   1,213,906
Long-Term Liabilities
Long term debt                               $ 3,061,192 $ 2,764,787 $         2,447,376
Total Liabilities                            $ 3,993,491 $ 3,859,192 $         3,661,282

Stockholders' Equity                         $ 1,000,000 $ 1,000,000 $         1,000,000
Common Stock                                 $ 800,000 $ 800,000 $               800,000
Preferred Stock                              $ 200,000 $ 200,000 $               200,000
Retained Earnings                            $ 142,448 $ 398,897 $               662,623
Total Stockholders' Equity                   $ 1,142,448 $ 1,398,897 $         1,662,623
Total Liabilities & Stockholders' Equity     $ 5,135,939 $ 5,258,088 $         5,323,905


                                                     96000 $      96,000   $      96,000
                                             $      20,000 $      20,000   $      20,000
       Year 4          Year 5


$   1,926,759   $   1,938,404
$     666,291   $     706,268
$         -     $         -
$   2,593,050   $   2,644,673

$     424,000   $     424,000
$     127,000   $     127,000
$      51,000   $      51,000
$   2,500,000   $   2,500,000
$         -     $         -
$     134,500   $     134,500
$   3,236,500   $   3,236,500
$     594,533   $     743,167
$   2,641,967   $   2,493,333

$   5,235,017 $     5,138,006


$     766,235   $     812,209
$     125,207   $     100,961
$     424,590   $     492,386
$   1,316,032   $   1,405,555

$   2,107,398 $     1,743,173
$   3,423,430 $     3,148,728

$   1,000,000   $   1,000,000
$     800,000   $     800,000
$     200,000   $     200,000
$     811,587   $     989,278
$   1,811,587   $   1,989,278
$   5,235,017   $   5,138,006


$      96,000   $      96,000
$      20,000   $      20,000
								
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