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Microsoft Excel LibreOffice Calc


Economic Value Added (EVA)

Difficulty: Advanced


Economic Profit

Broadcom Inc., economic profit calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
Net operating profit after taxes (NOPAT)1 hidden hidden hidden hidden hidden hidden
Cost of capital2 hidden% hidden% hidden% hidden% hidden% hidden%
Invested capital3 hidden hidden hidden hidden hidden hidden
Economic profit4 hidden hidden hidden hidden hidden hidden

Source: Based on data from Broadcom Inc. Annual Reports

2017 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
= hiddenhidden% × 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. Broadcom Inc.'s economic profit declined from 2015 to 2016 but then slightly increased from 2016 to 2017.

Net Operating Profit after Taxes (NOPAT)

Broadcom Inc., NOPAT calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
Net income (loss) attributable to ordinary shares hidden hidden hidden hidden hidden hidden
Deferred income tax expense (benefit)1 hidden hidden hidden hidden hidden hidden
Increase (decrease) in allowances for doubtful accounts2 hidden hidden hidden hidden hidden hidden
Increase (decrease) in restructuring liabilities3 hidden hidden hidden hidden hidden hidden
Increase (decrease) in equity equivalents4 hidden hidden hidden hidden hidden hidden
Interest expense hidden hidden hidden hidden hidden hidden
Interest expense, operating lease obligations5 hidden hidden hidden hidden hidden hidden
Adjusted interest expense hidden hidden hidden hidden hidden hidden
Tax benefit of interest expense6 hidden hidden hidden hidden hidden hidden
Adjusted interest expense, after taxes7 hidden hidden hidden hidden hidden hidden
Interest income hidden hidden hidden hidden hidden hidden
Investment income, before taxes hidden hidden hidden hidden hidden hidden
Tax expense (benefit) of investment income8 hidden hidden hidden hidden hidden hidden
Investment income, after taxes9 hidden hidden hidden hidden hidden hidden
(Income) loss from discontinued operations, net of tax10 hidden hidden hidden hidden hidden hidden
Net income (loss) attributable to noncontrolling interest hidden hidden hidden hidden hidden hidden
Net operating profit after taxes (NOPAT) hidden hidden hidden hidden hidden hidden

Source: Based on data from Broadcom Inc. Annual Reports

2017 Calculations

1 Elimination of deferred tax expense. See Details »

2 Addition of increase (decrease) in allowances for doubtful accounts.

3 Addition of increase (decrease) in restructuring liabilities.

4 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to ordinary shares.

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 × 17% = hidden

7 Addition of after taxes interest expense to net income (loss) attributable to ordinary shares.

8 Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 17% = hidden

9 Elimination of after taxes investment income.

10 Elimination of discontinued operations.

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. Broadcom Inc.'s NOPAT declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.

Cash Operating Taxes

Broadcom Inc., cash operating taxes calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
Provision for income taxes hidden hidden hidden hidden hidden hidden
Less: Deferred income tax expense (benefit) hidden hidden hidden hidden hidden hidden
Add: Tax savings from interest expense hidden hidden hidden hidden hidden hidden
Less: Tax imposed on investment income hidden hidden hidden hidden hidden hidden
Cash operating taxes hidden hidden hidden hidden hidden hidden

Source: Based on data from Broadcom Inc. Annual Reports

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. Broadcom Inc.'s cash operating taxes declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.

Invested Capital

Broadcom Inc., invested capital calculation (financing approach)

USD $ in millions

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
Current portion of long-term debt hidden hidden hidden hidden hidden hidden
Long-term debt hidden hidden hidden hidden hidden hidden
Convertible notes payable to related party, non-current hidden hidden hidden hidden hidden hidden
PV of operating lease payments1 hidden hidden hidden hidden hidden hidden
Total reported debt & leases hidden hidden hidden hidden hidden hidden
Total Broadcom Inc. stockholders’ equity hidden hidden hidden hidden hidden hidden
Net deferred tax (assets) liabilities2 hidden hidden hidden hidden hidden hidden
Allowances for doubtful accounts3 hidden hidden hidden hidden hidden hidden
Restructuring liabilities4 hidden hidden hidden hidden hidden hidden
Equity equivalents5 hidden hidden hidden hidden hidden hidden
Accumulated other comprehensive (income) loss, net of tax6 hidden hidden hidden hidden hidden hidden
Noncontrolling interest hidden hidden hidden hidden hidden hidden
Adjusted total Broadcom Inc. stockholders’ equity hidden hidden hidden hidden hidden hidden
Construction in progress7 hidden hidden hidden hidden hidden hidden
Invested capital hidden hidden hidden hidden hidden hidden

Source: Based on data from Broadcom Inc. Annual Reports

1 Addition of capitalized operating leases. See Details »

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

3 Addition of allowance for doubtful accounts receivable.

4 Addition of restructuring liabilities.

5 Addition of equity equivalents to total Broadcom Inc. stockholders’ equity.

6 Removal of accumulated other comprehensive income.

7 Subtraction of construction in progress.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Broadcom Inc.'s invested capital increased from 2015 to 2016 and from 2016 to 2017.

Cost of Capital

Broadcom Inc., cost of capital calculations

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Borrowings3 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 17%) = hidden%
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 17%) = hidden%
Total: hidden hidden hidden%

Source: Based on data from Broadcom Inc. Annual Reports

1 USD $ in millions

2 Equity. See Details »

3 Borrowings. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Borrowings3 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 17%) = hidden%
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 17%) = hidden%
Total: hidden hidden hidden%

Source: Based on data from Broadcom Inc. Annual Reports

1 USD $ in millions

2 Equity. See Details »

3 Borrowings. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Borrowings3 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 17%) = hidden%
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 17%) = hidden%
Total: hidden hidden hidden%

Source: Based on data from Broadcom Inc. Annual Reports

1 USD $ in millions

2 Equity. See Details »

3 Borrowings. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Borrowings3 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 17%) = hidden%
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 17%) = hidden%
Total: hidden hidden hidden%

Source: Based on data from Broadcom Inc. Annual Reports

1 USD $ in millions

2 Equity. See Details »

3 Borrowings. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Borrowings3 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 17%) = hidden%
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 17%) = hidden%
Total: hidden hidden hidden%

Source: Based on data from Broadcom Inc. Annual Reports

1 USD $ in millions

2 Equity. See Details »

3 Borrowings. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Borrowings3 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 17%) = hidden%
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 17%) = hidden%
Total: hidden hidden hidden%

Source: Based on data from Broadcom Inc. Annual Reports

1 USD $ in millions

2 Equity. See Details »

3 Borrowings. See Details »

4 PV of operating lease payments. See Details »


Economic Spread

Broadcom Inc., economic spread calculation

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
Selected Financial Data (USD $ in millions)
Economic profit1 hidden hidden hidden hidden hidden hidden
Invested capital2 hidden hidden hidden hidden hidden hidden
Ratio
Economic spread3 hidden% hidden% hidden% hidden% hidden% hidden%

Source: Based on data from Broadcom Inc. Annual Reports

2017 Calculations

1 Economic profit. See Details »

2 Invested capital. See Details »

3 Economic spread = 100 × Economic profit ÷ Invested capital
= 100 × hidden ÷ hidden = hidden%

Ratio Description The company
Economic spread The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Broadcom Inc.'s economic spread deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.

Economic Profit Margin

Broadcom Inc., economic profit margin calculation

Microsoft Excel LibreOffice Calc
Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
Selected Financial Data (USD $ in millions)
Economic profit1 hidden hidden hidden hidden hidden hidden
Net revenue hidden hidden hidden hidden hidden hidden
Ratio
Economic profit margin2 hidden% hidden% hidden% hidden% hidden% hidden%

Source: Based on data from Broadcom Inc. Annual Reports

2017 Calculations

1 Economic profit. See Details »

2 Economic profit margin = 100 × Economic profit ÷ Net revenue
= 100 × hidden ÷ hidden = hidden%

Ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company's profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Broadcom Inc.'s economic profit margin deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.