ROIC vs cost of capital
Measure return on invested capital — the return a business earns on all its capital, debt and equity — and compare it with the cost of that capital to see whether growth creates or destroys value.
Runs entirely in your browserRuns entirely on your device — nothing you type is sent anywhere. Educational only, and not investment advice.
How to use this calculator
Each step names a control you will find on screen above.
- EBIT
Operating profit before interest and tax. Multiplied by one minus the tax rate, it becomes NOPAT — the numerator.
- Tax rate
The effective tax rate, used to convert EBIT into after-tax operating profit (NOPAT).
- Invested capital
The capital actually put to work — typically equity plus debt minus surplus cash. It is the denominator of ROIC.
- Cost of capital
The hurdle rate (a weighted average cost of capital). ROIC only creates value when it clears this.
Worked example: ROIC against a 10% hurdle
EBIT ₹150 cr, tax 25%, invested capital ₹900 cr, cost of capital 10%.
What to enter
- EBIT
- ₹150 cr
- Tax rate
- 25%
- Invested capital
- ₹900 cr
- Cost of capital
- 10%
What it shows you
- NOPAT
- ₹112.5 cr
- ROIC
- 12.5%
- Value spread
- +2.5%
- Verdict
- Creating value — growth worth pursuing
Where this is taught
A calculator gives you a number. These explain what the number means and when it misleads you.
- Fundamental Analysis11 minROIC: the truest test of a business’s qualityReturn on invested capital measures how well a company turns all its capital — debt and equity — into profit. Why it beats ROE, how it compares to the cost of that capital, and what a great ROIC looks like.
- Fundamental Analysis11 minEconomic value added: profit after charging for all capitalAccounting profit charges for debt but never for equity. EVA — residual income — subtracts the full cost of capital, revealing whether a company truly created value or just looked profitable.
- Fundamental Analysis9 minCFROI: a return on capital that survives inflation and accountingAccounting returns like ROIC are nominal and shaped by a firm’s bookkeeping choices, which makes comparing companies across time and borders treacherous. CFROI tries to fix that by expressing return as a real, inflation-adjusted rate — closer to an economic truth than an accounting one.