Calculate the required return (weighted average cost of capital) Market Weights Component Weighted Values Cost Cost Debt Equity Required return (weighted average cost of capital)................................... Calculate the Economic Profit (Economic Value Added) Year 2016 2017 2018 2019 2020 2021 2022 Net Operating Assets $391,327 $405,612 $418,805 $447,432 $516,582 $537,070 $591,239 times the required return Required income in dollars Year 2016 2017 2018 2019 2020 2021 2022 Operating Income earned $18,131 $21,817 $19,332 $21,811 $19,980 $27,236 $25,138 Less required income Economic profit or (loss) Another way to look at this: Return on invested capital 4.63% 5.38% 4.62% 4.87% 3.87% 5.07% 4.25% Weighted average cost of capital Spread