ROIC vs WACC Value-Creation Calculator
ROIC and WACC are definition-sensitive estimates. The trend and the economics of incremental investment can matter more than one point value.
What it calculates
Growth creates economic value only when returns on incremental capital exceed the capital’s opportunity cost. Enter NOPAT, invested capital, and WACC to calculate ROIC, the ROIC-minus-WACC spread, and estimated annual economic profit.
How this roic vs wacc value-creation calculator works
The model divides after-tax operating profit by invested capital, subtracts the entered capital cost, and multiplies invested capital by the spread to estimate economic profit.
Formula
ROIC = NOPAT ÷ invested capital; economic profit = NOPAT − invested capital × WACC
Accounting choices and intangible investment can materially distort both numerator and denominator. A positive spread does not by itself establish valuation upside.
Primary specifications
Before you use the result
Assumptions
- • NOPAT and invested capital use consistent operating definitions.
- • WACC is an editable opportunity-cost estimate rather than an observable fact.
- • Acquisitions, goodwill, leases, excess cash, and capitalized intangibles are treated consistently.
Quick start
- 1. Reconcile NOPAT and invested capital from filings.
- 2. Test a range of capital costs rather than one decimal point.
- 3. Compare historical, current, and incremental returns with reinvestment opportunities.
Inputs and units
| Input | Unit | Default |
|---|---|---|
| Net operating profit after tax | US$ millions | $1.2B |
| Invested capital | US$ millions | $10B |
| Weighted average cost of capital | percent | 9% |
Worked example (hypothetical)
ROIC vs WACC Value-Creation Calculator: worked example
Hypothetical example using the calculator's default inputs. The numbers are illustrative, not a forecast or a quote.
| Net operating profit after tax | $1.2B |
|---|---|
| Invested capital | $10B |
| Weighted average cost of capital | 9% |
| ROIC minus WACC | 3.00% |
|---|---|
| ROIC | 12.00% |
| Annual economic profit | $300M |
With these inputs, the ROIC minus WACC is 3.00%.
Frequently asked questions
What is ROIC?
Return on invested capital compares after-tax operating profit with the capital committed to operating the business.
What is WACC?
Weighted average cost of capital estimates the opportunity cost required by debt and equity providers, weighted by financing mix.
Does ROIC above WACC guarantee a good stock return?
No. Valuation, durability, reinvestment runway, expectations, and future changes determine the investment outcome.
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