Abstract: This study examines the effectiveness of Economic Value Added (EVA) as a performance measure, comparing it with traditional profitability metrics through simulation. EVA, calculated as Net Operating Profit After Tax (NOPAT) minus Weighted Average Cost of Capital (WACC), is analyzed for 10 NIFTY companies over five fiscal years. The research reveals EVA's high sensitivity to the cost of equity and unexpected insensitivity to the cost of debt under normal conditions. Firm growth policies and leverage significantly impact EVA and its variability. Furthermore, EVA is found to be more volatile than return on investment (ROI) and closely related to return on equity (ROE). The analysis indicates no strong pattern of wealth creation among the studied companies, with EVA varying yearly based on the cost of capital, particularly the cost of equity. Ultimately, the study finds no strong correlation between EVA and market price for the selected companies.

Keywords: EVA, NOPAT, WACC, EBIT

| DOI: 10.17148/IARJSET.2025.124113