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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 Ratio
Economic Profit Margin

Philip Morris International Inc., economic profit calculation

US$ in millions

	12 months ended:	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	Net operating profit after taxes (NOPAT)¹
	Cost of capital²
	Invested capital³

	Economic profit⁴

Based on: 10-K (filing date: 2020-02-07), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-17).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =

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.	Philip Morris International Inc.’s economic profit increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.

Philip Morris International Inc., NOPAT calculation

US$ in millions

	12 months ended:	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	Net earnings attributable to PMI
	Deferred income tax expense (benefit)¹
	Increase (decrease) in allowances²
	Increase (decrease) in accrued product warranty³
	Increase (decrease) in exit cost liabilities⁴
	Increase (decrease) in equity equivalents⁵
	Interest expense
	Interest expense, operating lease liability⁶
	Adjusted interest expense
	Tax benefit of interest expense⁷
	Adjusted interest expense, after taxes⁸
	Interest income
	Investment income, before taxes
	Tax expense (benefit) of investment income⁹
	Investment income, after taxes¹⁰
	Net income (loss) attributable to noncontrolling interest
	Net operating profit after taxes (NOPAT)

Based on: 10-K (filing date: 2020-02-07), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-17).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowances.

³ Addition of increase (decrease) in accrued product warranty.

⁴ Addition of increase (decrease) in exit cost liabilities.

⁵ Addition of increase (decrease) in equity equivalents to net earnings attributable to PMI.

⁶ 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

⁷ 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =

⁸ Addition of after taxes interest expense to net earnings attributable to PMI.

⁹ 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =

¹⁰ 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.	Philip Morris International Inc.’s NOPAT increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.

Philip Morris International Inc., cash operating taxes calculation

US$ in millions

	12 months ended:	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	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: 2020-02-07), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-17).

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.	Philip Morris International Inc.’s cash operating taxes decreased from 2017 to 2018 and from 2018 to 2019.

Philip Morris International Inc., invested capital calculation (financing approach)

US$ in millions

		Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
	Short-term borrowings
	Current portion of long-term debt
	Long-term debt, excluding current portion
	Operating lease liability¹
	Total reported debt & leases
	Total PMI stockholders’ deficit
	Net deferred tax (assets) liabilities²
	Allowances³
	Accrued product warranty⁴
	Exit cost liabilities⁵
	Equity equivalents⁶
	Accumulated other comprehensive (income) loss, net of tax⁷
	Noncontrolling interests
	Adjusted total PMI stockholders’ deficit
	Construction in progress⁸
	Invested capital

Based on: 10-K (filing date: 2020-02-07), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-17).

¹ Addition of capitalized operating leases.

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

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of accrued product warranty.

⁵ Addition of exit cost liabilities.

⁶ Addition of equity equivalents to total PMI stockholders’ deficit.

⁷ Removal of accumulated other comprehensive income.

⁸ 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.	Philip Morris International Inc.’s invested capital decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.

Philip Morris International Inc., cost of capital calculations


Equity²	÷	=	×		=
Debt, including finance lease obligations³	÷	=	×	× (1 – 21.00%)	=
Operating lease liability⁴	÷	=	×	× (1 – 21.00%)	=
Total:

Based on: 10-K (filing date: 2020-02-07).

¹ US$ in millions

² Equity. See details »