Apple Inc. (AAPL)

EVA is registered trademark of Stern Stewart.

Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread
Economic Profit Margin

Apple Inc., economic profit calculation

USD $ in millions

	12 months ended	Sep 29, 2018	Sep 30, 2017	Sep 24, 2016	Sep 26, 2015	Sep 27, 2014	Sep 28, 2013
	Net operating profit after taxes (NOPAT)¹
	Cost of capital²
	Invested capital³

	Economic profit⁴

Based on: 10-K (filing date: 2018-11-05), 10-K (filing date: 2017-11-03), 10-K (filing date: 2016-10-26), 10-K (filing date: 2015-10-28), 10-K (filing date: 2014-10-27), 10-K (filing date: 2013-10-30).

2018 Calculations

¹ NOPAT. See Details »

² Cost of capital. See Details »

³ Invested capital. See Details »

⁴ Economic profit = NOPAT – Cost of capital × Invested capital
= hidden – hidden × hidden = hidden

Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Apple Inc.'s economic profit increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Apple Inc., NOPAT calculation

USD $ in millions

	12 months ended	Sep 29, 2018	Sep 30, 2017	Sep 24, 2016	Sep 26, 2015	Sep 27, 2014	Sep 28, 2013
	Net income
	Deferred income tax expense (benefit)¹
	Increase (decrease) in deferred revenue²
	Increase (decrease) in accrued warranty and related costs³
	Increase (decrease) in equity equivalents⁴
	Interest expense
	Interest expense, operating lease obligations⁵
	Adjusted interest expense
	Tax benefit of interest expense⁶
	Adjusted interest expense, after taxes⁷
	(Gain) loss on marketable securities
	Interest and dividend income
	Investment income, before taxes
	Tax expense (benefit) of investment income⁸
	Investment income, after taxes⁹
	Net operating profit after taxes (NOPAT)

Based on: 10-K (filing date: 2018-11-05), 10-K (filing date: 2017-11-03), 10-K (filing date: 2016-10-26), 10-K (filing date: 2015-10-28), 10-K (filing date: 2014-10-27), 10-K (filing date: 2013-10-30).

2018 Calculations

¹ Elimination of deferred tax expense. See Details »

² Addition of increase (decrease) in deferred revenue.

³ Addition of increase (decrease) in accrued warranty and related costs.

⁴ Addition of increase (decrease) in equity equivalents to net income.

⁵ Addition of interest expense on capitalized operating leases. See Details »

⁶ Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= hidden × 24.50% = hidden

⁷ Addition of after taxes interest expense to net income.

⁸ Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 24.50% = hidden

⁹ Elimination of after taxes investment income.

Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Apple Inc.'s NOPAT increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Apple Inc., cash operating taxes calculation

USD $ in millions

	12 months ended	Sep 29, 2018	Sep 30, 2017	Sep 24, 2016	Sep 26, 2015	Sep 27, 2014	Sep 28, 2013
	Provision for income taxes
	Less: Deferred income tax expense (benefit)
	Add: Tax savings from interest expense
	Less: Tax imposed on investment income
	Cash operating taxes

Based on: 10-K (filing date: 2018-11-05), 10-K (filing date: 2017-11-03), 10-K (filing date: 2016-10-26), 10-K (filing date: 2015-10-28), 10-K (filing date: 2014-10-27), 10-K (filing date: 2013-10-30).

Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Apple Inc.'s cash operating taxes declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Apple Inc., invested capital calculation (financing approach)

USD $ in millions

		Sep 29, 2018	Sep 30, 2017	Sep 24, 2016	Sep 26, 2015	Sep 27, 2014	Sep 28, 2013
	Commercial paper
	Current portion of term debt
	Term debt, excluding current portion
	PV of operating lease payments¹
	Total reported debt & leases
	Shareholders' equity
	Net deferred tax (assets) liabilities²
	Deferred revenue³
	Accrued warranty and related costs⁴
	Equity equivalents⁵
	Accumulated other comprehensive (income) loss, net of tax⁶
	Adjusted shareholders' equity
	Marketable securities⁷
	Invested capital

Based on: 10-K (filing date: 2018-11-05), 10-K (filing date: 2017-11-03), 10-K (filing date: 2016-10-26), 10-K (filing date: 2015-10-28), 10-K (filing date: 2014-10-27), 10-K (filing date: 2013-10-30).

¹ Addition of capitalized operating leases. See Details »

² Elimination of deferred taxes from assets and liabilities. See Details »

³ Addition of deferred revenue.

⁴ Addition of accrued warranty and related costs.

⁵ Addition of equity equivalents to shareholders' equity.

⁶ Removal of accumulated other comprehensive income.

⁷ Subtraction of marketable securities.

Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Apple Inc.'s invested capital increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Apple Inc., cost of capital calculations


Equity²	÷	=	×		=
Commercial paper and term debt³	÷	=	×	× (1 – 24.50%)	=
PV of operating lease payments⁴	÷	=	×	× (1 – 24.50%)	=
Total:

Based on: 10-K (filing date: 2018-11-05).

¹ USD $ in millions

² Equity. See Details »

³ Commercial paper and term debt. See Details »