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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

Lowe’s Cos. Inc., economic profit calculation

USD $ in millions

	12 months ended	Feb 1, 2019	Feb 2, 2018	Feb 3, 2017	Jan 29, 2016	Jan 30, 2015	Jan 31, 2014
	Net operating profit after taxes (NOPAT)¹
	Cost of capital²
	Invested capital³

	Economic profit⁴

Based on: 10-K (filing date: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-03-31).

2019 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.	Lowe’s Cos. Inc.’s economic profit increased from 2017 to 2018 but then declined significantly from 2018 to 2019.

Lowe’s Cos. Inc., NOPAT calculation

USD $ in millions

	12 months ended	Feb 1, 2019	Feb 2, 2018	Feb 3, 2017	Jan 29, 2016	Jan 30, 2015	Jan 31, 2014
	Net earnings
	Deferred income tax expense (benefit)¹
	Increase (decrease) in deferred revenue²
	Increase (decrease) in accrual for exit activities³
	Increase (decrease) in equity equivalents⁴
	Interest expense, net of amount capitalized
	Interest expense, operating lease obligations⁵
	Adjusted interest expense, net of amount capitalized
	Tax benefit of interest expense, net of amount capitalized⁶
	Adjusted interest expense, net of amount capitalized, after taxes⁷
	Interest 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: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-03-31).

2019 Calculations

¹ Elimination of deferred tax expense. See Details »

² Addition of increase (decrease) in deferred revenue.

³ Addition of increase (decrease) in accrual for exit activities.

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

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

⁶ Tax benefit of interest expense, net of amount capitalized = Adjusted interest expense, net of amount capitalized × Statutory income tax rate
= hidden × 21.00% = hidden

⁷ Addition of after taxes interest expense to net earnings.

⁸ Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 21.00% = 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.	Lowe’s Cos. Inc.’s NOPAT increased from 2017 to 2018 but then declined significantly from 2018 to 2019.

Lowe’s Cos. Inc., cash operating taxes calculation

USD $ in millions

	12 months ended	Feb 1, 2019	Feb 2, 2018	Feb 3, 2017	Jan 29, 2016	Jan 30, 2015	Jan 31, 2014
	Income tax provision
	Less: Deferred income tax expense (benefit)
	Add: Tax savings from interest expense, net of amount capitalized
	Less: Tax imposed on investment income
	Cash operating taxes

Based on: 10-K (filing date: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-03-31).

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.	Lowe’s Cos. Inc.’s cash operating taxes declined from 2017 to 2018 and from 2018 to 2019.

Lowe’s Cos. Inc., invested capital calculation (financing approach)

USD $ in millions

		Feb 1, 2019	Feb 2, 2018	Feb 3, 2017	Jan 29, 2016	Jan 30, 2015	Jan 31, 2014
	Short-term borrowings
	Current maturities of long-term debt
	Long-term debt, excluding current maturities
	PV of operating lease payments¹
	Total reported debt & leases
	Shareholders’ equity
	Net deferred tax (assets) liabilities²
	Deferred revenue³
	Accrual for exit activities⁴
	Equity equivalents⁵
	Accumulated other comprehensive (income) loss, net of tax⁶
	Adjusted shareholders’ equity
	Construction in progress⁷
	Investments⁸
	Invested capital

Based on: 10-K (filing date: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-03-31).

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 accrual for exit activities.

⁵ Addition of equity equivalents to shareholders’ equity.

⁶ Removal of accumulated other comprehensive income.

⁷ Subtraction of construction in progress.

⁸ 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.	Lowe’s Cos. Inc.’s invested capital increased from 2017 to 2018 but then declined significantly from 2018 to 2019.

Lowe’s Cos. Inc., cost of capital calculations


Equity²	÷	=	×		=
Debt, including capitalized lease obligations³	÷	=	×	× (1 – 21.00%)	=
PV of operating lease payments⁴	÷	=	×	× (1 – 21.00%)	=
Total:

Based on: 10-K (filing date: 2019-04-02).

¹ USD $ in millions

² Equity. See Details »