# Economic Value Added

`D18-F02-A05` · Fundamental Analysis and Valuation → Intrinsic Valuation · archetype `record-transform` · difficulty 4/5 · verification **verified**

Full page: https://docs.thefintechbuilder.com/fundamental-analysis-and-valuation/intrinsic-valuation/economic-value-added/
Agent skill: `npx skills add IslamBaraka90/Fintech-Algorithms-Library` — https://docs.thefintechbuilder.com/guides/agent-skill/

## Install and import

```bash
npm install fintech-algorithms
```

```ts
import { economicValueAdded } from "fintech-algorithms/fundamental-analysis-and-valuation/intrinsic-valuation/economic-value-added";
```

## Signature

```ts
economicValueAdded(data)
```

Charges each period's opening invested capital at the WACC, discounts the NOPAT that remains above that charge, and adds a growing-perpetuity continuing value to give market value added and an enterprise value equal to opening invested capital plus that premium.

## Parameters

| Name | Type | Required | Notes |
| --- | --- | --- | --- |
| `data` | `{ opening_invested_capital: number; nopat: number[]; net_investment: number[]; wacc: number; terminal_eva_growth: number }` | yes | `opening_invested_capital` starts the capital roll-forward, to which each period's `net_investment` is added. `nopat` supplies net operating profit after tax per period and must be the same length as `net_investment`. `wacc` sets both the capital charge on opening capital and the discount rate, and `terminal_eva_growth` grows the last period's EVA into the continuing value. Other keys in the record are not read. |

## Returns

`{ state: string; method: string; schedule: { period: number; opening_invested_capital: number; nopat: number; net_investment: number; capital_charge: number; roic: number; roic_wacc_spread: number; eva: number; discount_factor: number; present_value: number; closing_invested_capital: number }[]; pv_explicit_eva: number; terminal_eva: number; continuing_value: number; terminal_discount_factor: number; pv_continuing_value: number; market_value_added: number; continuing_value_share: number; closing_invested_capital: number; enterprise_value: number }`

A `schedule` row per period with its `capital_charge`, `roic`, `roic_wacc_spread`, `eva`, `discount_factor` and `present_value`, plus the capital roll-forward. Then `pv_explicit_eva`, the continuing block (`terminal_eva`, `continuing_value`, `terminal_discount_factor`, `pv_continuing_value`), `market_value_added` as the sum of both present values, the final `closing_invested_capital`, and `enterprise_value` as opening invested capital plus market value added. `continuing_value_share` is the continuing present value over enterprise value, emitted as 0 when enterprise value is 0. No per-share figure is returned.

## Errors

- When `data` is absent, an array, or not an object — throws Error
- When `opening_invested_capital` is not a positive finite number — throws Error
- When `nopat` or `net_investment` is not an array holding at least one finite number — throws Error
- When `net_investment` differs in length from `nopat` — throws Error
- When `wacc` is not strictly between 0 and 1 — throws Error
- When `terminal_eva_growth` is at or below -1, or at or above `wacc` — throws Error
- When the invested-capital roll-forward reaches a non-positive closing balance — throws Error

## Complexity

Time `O(n)`, space `O(n)`.

## Worked example

Captured by running this function on the input its own test provides. Real output of real code — but not asserted against a published figure.

### Input

`data`:

```json
{
  "valuation_date": "2026-08-04",
  "currency": "USD",
  "unit_scale": "millions",
  "opening_invested_capital": 800,
  "nopat": [92, 100, 110, 121, 132],
  "net_investment": [50, 50, 55, 60, 60],
  "wacc": 0.09,
  "terminal_eva_growth": 0.03,
  "adjustment_basis": "already-adjusted synthetic NOPAT and invested capital"
}
```

### Call

```ts
economicValueAdded(data)
```

### Returns

object with 12 fields: state, method, schedule, pv_explicit_eva, terminal_eva, continuing_value, terminal_discount_factor, pv_continuing_value, …

```json
{
  "state": "valued",
  "method": "economic-value-added",
  "schedule": [
    {
      "period": 1,
      "opening_invested_capital": 800,
      "nopat": 92,
      "net_investment": 50,
      "capital_charge": 72,
      "roic": 0.115,
      "roic_wacc_spread": 0.02500000000000001,
      "eva": 20,
      "discount_factor": 0.9174311926605504,
      "present_value": 18.34862385321101,
      "closing_invested_capital": 850
    },
    {
      "period": 2,
      "opening_invested_capital": 850,
      "nopat": 100,
      "net_investment": 50,
      "capital_charge": 76.5,
      "roic": 0.11764705882352941,
      "roic_wacc_spread": 0.027647058823529413,
      "eva": 23.5,
      "discount_factor": 0.84167999326656,
      "present_value": 19.779479841764157,
      "closing_invested_capital": 900
    },
    {
      "period": 3,
      "opening_invested_capital": 900,
      "nopat": 110,
      "net_investment": 55,
      "capital_charge": 81,
      "roic": 0.12222222222222222,
      "roic_wacc_spread": 0.03222222222222222,
      "eva": 29,
      "discount_factor": 0.772183480061064,
      "present_value": 22.393320921770854,
      "closing_invested_capital": 955
    }
  ],
  "pv_explicit_eva": 111.77143911760888,
  "terminal_eva": 41.86950000000001,
  "continuing_value": 697.8250000000002,
  "terminal_discount_factor": 0.6499313862983452,
  "pv_continuing_value": 453.53836964364285,
  "market_value_added": 565.3098087612517,
  "continuing_value_share": 0.33218714663387583,
  "closing_invested_capital": 1075,
  "enterprise_value": 1365.3098087612516
}
```

## Other exports

`calculate`, `freeCashFlowDcf`, `dividendDiscountModel`, `gordonGrowthModel`, `residualIncomeModel`. Every module additionally exports `run` as an alias of its primary
function, and a `meta` object carrying its catalog id, domain, family, shape and article URL.

## Verification and provenance

Tier: **verified** (via D).

The worked example below is the figure published in this algorithm's article, replayed and asserted by the test suite on every build. The arithmetic cannot drift without the build failing.

Both tiers guarantee the signature. Full explanation: https://docs.thefintechbuilder.com/guides/verification/

Generated from the docs.json payload shipped inside fintech-algorithms@0.13.0.
The signature and parameter list are checked against the compiled implementation at build time,
so a description that contradicts the code fails the build rather than reaching this file.

## Links

- Article (how it works, step by step): https://thefintechbuilder.com/fundamental-analysis-and-valuation/intrinsic-valuation/economic-value-added/
- Implementation source: https://github.com/IslamBaraka90/Fintech-Algorithms-Library/blob/main/src/fundamental-analysis-and-valuation/intrinsic-valuation/economic-value-added/impl.ts
- Package on npm: https://www.npmjs.com/package/fintech-algorithms
- Domain index for agents: https://docs.thefintechbuilder.com/fundamental-analysis-and-valuation/llms.txt