CVS Health Corp. (CVS)

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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

CVS Health Corp., economic profit calculation

USD $ in millions

	12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Net operating profit after taxes (NOPAT)¹
	Cost of capital²
	Invested capital³

	Economic profit⁴

Based on: 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-09), 10-K (filing date: 2015-02-10), 10-K (filing date: 2014-02-11).

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
= 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.	CVS Health Corp.'s economic profit increased from 2015 to 2016 and from 2016 to 2017.

CVS Health Corp., NOPAT calculation

USD $ in millions

	12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Net income attributable to CVS Health
	Deferred income tax expense (benefit)¹
	Increase (decrease) in allowance for doubtful accounts receivable²
	Increase (decrease) in equity equivalents³
	Interest expense
	Interest expense, operating lease obligations⁴
	Adjusted interest expense
	Tax benefit of interest expense⁵
	Adjusted interest expense, after taxes⁶
	Interest income
	Investment income, before taxes
	Tax expense (benefit) of investment income⁷
	Investment income, after taxes⁸
	(Income) loss from discontinued operations, net of tax⁹
	Net income (loss) attributable to noncontrolling interest
	Net operating profit after taxes (NOPAT)

Based on: 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-09), 10-K (filing date: 2015-02-10), 10-K (filing date: 2014-02-11).

2017 Calculations

¹ Elimination of deferred tax expense. See Details »

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

³ Addition of increase (decrease) in equity equivalents to net income attributable to CVS Health.

⁴ Addition of interest expense on capitalized operating leases. See Details »

⁵ Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= hidden × 35% = hidden

⁶ Addition of after taxes interest expense to net income attributable to CVS Health.

⁷ Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 35% = hidden

⁸ Elimination of after taxes investment income.

⁹ 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.	CVS Health Corp.'s NOPAT increased from 2015 to 2016 but then slightly declined from 2016 to 2017.

CVS Health Corp., cash operating taxes calculation

USD $ in millions

	12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Income tax provision for continuing operations
	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: 2018-02-14), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-09), 10-K (filing date: 2015-02-10), 10-K (filing date: 2014-02-11).

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.	CVS Health Corp.'s cash operating taxes declined from 2015 to 2016 and from 2016 to 2017.

CVS Health Corp., invested capital calculation (financing approach)

USD $ in millions

		Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Short-term debt
	Current portion of long-term debt
	Long-term debt, excluding current portion
	PV of operating lease payments¹
	Total reported debt & leases
	Total CVS Health shareholders' equity
	Net deferred tax (assets) liabilities²
	Allowance for doubtful accounts receivable³
	Equity equivalents⁴
	Accumulated other comprehensive (income) loss, net of tax⁵
	Redeemable noncontrolling interest
	Noncontrolling interest
	Adjusted total CVS Health shareholders' equity
	Investments⁶
	Invested capital

Based on: 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-09), 10-K (filing date: 2015-02-10), 10-K (filing date: 2014-02-11).

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 equity equivalents to total CVS Health shareholders' equity.

⁵ Removal of accumulated other comprehensive income.

⁶ Subtraction of investments.

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

CVS Health Corp., cost of capital calculations


Equity²	÷	=	×		=
Debt³	÷	=	×	× (1 – 35%)	=
PV of operating lease payments⁴	÷	=	×	× (1 – 35%)	=
Total:

Based on: 10-K (filing date: 2018-02-14).

¹ USD $ in millions

² Equity. See Details »

³ Debt. See Details »