Calculating EVAEVA is after-tax operating income minus the dollar cost of capital employed. The equation for EVA is expressed as follows:
EVA = After-tax operating income – (Weighted average cost of capital × Total capital employed)
The difficulty faced by most companies is computing the cost of capital employed. Two steps are involved: (1) determine the weighted average cost of capital (a percentage figure) and (2) determine the total dollar amount of capital employed.