Economic Profit

Economic Profit = NOPAT - $WACC

NOPAT: net operating profit after taxes
$WACC: dollar cost of capital used during the period

• Economic profit reflects the income earned by all capital providers.
• In theory, when discounted at the WACC, the present value of the economic profits (or net after-tax operating cash flows) from a project equals the NPV of the project.

See also: Economic Value Added (EVA)