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 Ratio
Economic Profit Margin

Target Corp., economic profit calculation

US$ in millions

12 months ended:	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018	Jan 28, 2017	Jan 30, 2016	Jan 31, 2015
Net operating profit after taxes (NOPAT)¹	3,896	3,683	3,262	3,451	3,477	3,107
Cost of capital²	6.33%	6.21%	6.00%	5.85%	6.31%	6.28%
Invested capital³	27,256	26,047	27,017	27,067	28,693	30,140

Economic profit⁴	2,171	2,064	1,641	1,866	1,667	1,214

Based on: 10-K (filing date: 2020-03-11), 10-K (filing date: 2019-03-13), 10-K (filing date: 2018-03-14), 10-K (filing date: 2017-03-08), 10-K (filing date: 2016-03-11), 10-K (filing date: 2015-03-13).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2020 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 3,896 – 6.33% × 27,256 = 2,171

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.	Target Corp.’s economic profit increased from 2018 to 2019 and from 2019 to 2020.

Target Corp., NOPAT calculation

US$ in millions

12 months ended:	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018	Jan 28, 2017	Jan 30, 2016	Jan 31, 2015
Net earnings (loss)	3,281	2,937	2,934	2,737	3,363	(1,636)
Deferred income tax expense (benefit)¹	178	322	(192)	41	(322)	7
Increase (decrease) in equity equivalents²	178	322	(192)	41	(322)	7
Net interest expense	477	461	666	1,004	607	882
Interest expense, operating lease liability³	92	85	127	136	128	120
Adjusted net interest expense	569	546	793	1,140	735	1,002
Tax benefit of net interest expense⁴	(119)	(115)	(267)	(399)	(257)	(351)
Adjusted net interest expense, after taxes⁵	449	431	526	741	478	651
(Income) loss from discontinued operations, net of tax⁶	(12)	(7)	(6)	(68)	(42)	4,085
Net operating profit after taxes (NOPAT)	3,896	3,683	3,262	3,451	3,477	3,107

Based on: 10-K (filing date: 2020-03-11), 10-K (filing date: 2019-03-13), 10-K (filing date: 2018-03-14), 10-K (filing date: 2017-03-08), 10-K (filing date: 2016-03-11), 10-K (filing date: 2015-03-13).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in equity equivalents to net earnings (loss).

³ 2020 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 2,475 × 3.71% = 92

⁴ 2020 Calculation
Tax benefit of net interest expense = Adjusted net interest expense × Statutory income tax rate
= 569 × 21.00% = 119

⁵ Addition of after taxes interest expense to net earnings (loss).

⁶ 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.	Target Corp.’s NOPAT increased from 2018 to 2019 and from 2019 to 2020.

Target Corp., cash operating taxes calculation

US$ in millions

12 months ended:	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018	Jan 28, 2017	Jan 30, 2016	Jan 31, 2015
Provision for income taxes	921	746	718	1,296	1,602	1,204
Less: Deferred income tax expense (benefit)	178	322	(192)	41	(322)	7
Add: Tax savings from net interest expense	119	115	267	399	257	351
Cash operating taxes	862	539	1,177	1,654	2,181	1,548

Based on: 10-K (filing date: 2020-03-11), 10-K (filing date: 2019-03-13), 10-K (filing date: 2018-03-14), 10-K (filing date: 2017-03-08), 10-K (filing date: 2016-03-11), 10-K (filing date: 2015-03-13).

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.	Target Corp.’s cash operating taxes decreased from 2018 to 2019 but then increased from 2019 to 2020 not reaching 2018 level.

Target Corp., invested capital calculation (financing approach)

US$ in millions

	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018	Jan 28, 2017	Jan 30, 2016	Jan 31, 2015
Current portion of long-term debt and other borrowings	161	1,052	270	1,718	815	91
Long-term debt and other borrowings, excluding current portion	11,338	10,223	11,317	11,031	11,945	12,705
Operating lease liability¹	2,475	2,170	2,734	2,102	1,872	2,042
Total reported debt & leases	13,974	13,445	14,321	14,851	14,632	14,838
Shareholders’ investment	11,833	11,297	11,709	10,953	12,957	13,997
Net deferred tax (assets) liabilities²	1,114	960	680	825	790	1,130
Equity equivalents³	1,114	960	680	825	790	1,130
Accumulated other comprehensive (income) loss, net of tax⁴	868	805	747	638	629	599
Adjusted shareholders’ investment	13,815	13,062	13,136	12,416	14,376	15,726
Construction-in-progress⁵	(533)	(460)	(440)	(200)	(315)	(424)
Invested capital	27,256	26,047	27,017	27,067	28,693	30,140

Based on: 10-K (filing date: 2020-03-11), 10-K (filing date: 2019-03-13), 10-K (filing date: 2018-03-14), 10-K (filing date: 2017-03-08), 10-K (filing date: 2016-03-11), 10-K (filing date: 2015-03-13).

¹ Addition of capitalized operating leases.

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

³ Addition of equity equivalents to shareholders’ investment.

⁴ Removal of accumulated other comprehensive income.

⁵ 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.	Target Corp.’s invested capital decreased from 2018 to 2019 but then increased from 2019 to 2020 exceeding 2018 level.

Target Corp., cost of capital calculations

	Capital (fair value)¹	Weights					Cost of capital
Equity²	52,892	52,892	÷	68,601	=	0.77	0.77	×	7.26%	=	5.60%
Debt³	13,234	13,234	÷	68,601	=	0.19	0.19	×	4.12% × (1 – 21.00%)	=	0.63%
Operating lease liability⁴	2,475	2,475	÷	68,601	=	0.04	0.04	×	3.71% × (1 – 21.00%)	=	0.11%
Total:	68,601					1.00					6.33%

Based on: 10-K (filing date: 2020-03-11).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

	Capital (fair value)¹	Weights					Cost of capital
Equity²	39,820	39,820	÷	53,819	=	0.74	0.74	×	7.26%	=	5.37%
Debt³	11,829	11,829	÷	53,819	=	0.22	0.22	×	4.15% × (1 – 21.00%)	=	0.72%
Operating lease liability⁴	2,170	2,170	÷	53,819	=	0.04	0.04	×	3.91% × (1 – 21.00%)	=	0.12%
Total:	53,819					1.00					6.21%

Based on: 10-K (filing date: 2019-03-13).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

	Capital (fair value)¹	Weights					Cost of capital
Equity²	38,066	38,066	÷	53,107	=	0.72	0.72	×	7.26%	=	5.20%
Debt³	12,307	12,307	÷	53,107	=	0.23	0.23	×	4.15% × (1 – 33.70%)	=	0.64%
Operating lease liability⁴	2,734	2,734	÷	53,107	=	0.05	0.05	×	4.64% × (1 – 33.70%)	=	0.16%
Total:	53,107					1.00					6.00%

Based on: 10-K (filing date: 2018-03-14).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

	Capital (fair value)¹	Weights					Cost of capital
Equity²	30,408	30,408	÷	46,080	=	0.66	0.66	×	7.26%	=	4.79%
Debt³	13,570	13,570	÷	46,080	=	0.29	0.29	×	4.56% × (1 – 35.00%)	=	0.87%
Operating lease liability⁴	2,102	2,102	÷	46,080	=	0.05	0.05	×	6.45% × (1 – 35.00%)	=	0.19%
Total:	46,080					1.00					5.85%

Based on: 10-K (filing date: 2017-03-08).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

	Capital (fair value)¹	Weights					Cost of capital
Equity²	49,121	49,121	÷	65,237	=	0.75	0.75	×	7.26%	=	5.46%
Debt³	14,244	14,244	÷	65,237	=	0.22	0.22	×	5.03% × (1 – 35.00%)	=	0.71%
Operating lease liability⁴	1,872	1,872	÷	65,237	=	0.03	0.03	×	6.84% × (1 – 35.00%)	=	0.13%
Total:	65,237					1.00					6.31%

Based on: 10-K (filing date: 2016-03-11).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

	Capital (fair value)¹	Weights					Cost of capital
Equity²	50,813	50,813	÷	67,732	=	0.75	0.75	×	7.26%	=	5.44%
Debt³	14,878	14,878	÷	67,732	=	0.22	0.22	×	5.05% × (1 – 35.00%)	=	0.72%
Operating lease liability⁴	2,042	2,042	÷	67,732	=	0.03	0.03	×	5.87% × (1 – 35.00%)	=	0.12%
Total:	67,732					1.00					6.28%

Based on: 10-K (filing date: 2015-03-13).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Target Corp., economic spread ratio calculation, comparison to benchmarks

	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018	Jan 28, 2017	Jan 30, 2016	Jan 31, 2015
Selected Financial Data (US$ in millions)
Economic profit¹	2,171	2,064	1,641	1,866	1,667	1,214
Invested capital²	27,256	26,047	27,017	27,067	28,693	30,140
Performance Ratio
Economic spread ratio³	7.97%	7.93%	6.07%	6.90%	5.81%	4.03%
Benchmarks
Economic Spread Ratio, Competitors⁴
Amazon.com Inc.	—	-4.61%	-3.85%	-11.12%	-6.93%	-10.16%
Costco Wholesale Corp.	—	6.56%	6.27%	5.00%	4.60%	3.91%
Dollar General Corp.	4.78%	4.66%	3.48%	3.32%	2.95%	2.20%
Home Depot Inc.	24.29%	24.70%	16.98%	14.77%	12.43%	11.40%
Lowe’s Cos. Inc.	6.90%	-0.56%	3.04%	1.95%	-0.02%	-0.02%
TJX Cos. Inc.	11.44%	10.79%	8.71%	8.74%	10.69%	11.35%
Walmart Inc.	5.90%	0.62%	3.71%	6.53%	5.60%	7.39%

Based on: 10-K (filing date: 2020-03-11), 10-K (filing date: 2019-03-13), 10-K (filing date: 2018-03-14), 10-K (filing date: 2017-03-08), 10-K (filing date: 2016-03-11), 10-K (filing date: 2015-03-13).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2020 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 2,171 ÷ 27,256 = 7.97%

⁴ Click competitor name to see calculations.

Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Target Corp.’s economic spread ratio improved from 2018 to 2019 and from 2019 to 2020.

Target Corp., economic profit margin calculation, comparison to benchmarks

	Feb 1, 2020	Feb 2, 2019	Feb 3, 2018	Jan 28, 2017	Jan 30, 2016	Jan 31, 2015
Selected Financial Data (US$ in millions)
Economic profit¹	2,171	2,064	1,641	1,866	1,667	1,214
Sales	77,130	74,433	71,879	69,495	73,785	72,618
Performance Ratio
Economic profit margin²	2.82%	2.77%	2.28%	2.69%	2.26%	1.67%
Benchmarks
Economic Profit Margin, Competitors³
Amazon.com Inc.	—	-2.08%	-1.69%	-4.92%	-2.16%	-3.14%
Costco Wholesale Corp.	—	1.03%	0.92%	0.73%	0.73%	0.60%
Dollar General Corp.	3.29%	3.29%	2.58%	2.46%	2.19%	1.73%
Home Depot Inc.	8.06%	7.80%	5.91%	5.37%	4.74%	4.41%
Lowe’s Cos. Inc.	2.56%	-0.20%	1.23%	0.82%	-0.01%	-0.01%
TJX Cos. Inc.	5.00%	4.70%	3.92%	3.94%	4.65%	5.08%
Walmart Inc.	1.90%	0.19%	1.07%	2.02%	1.82%	2.30%

Based on: 10-K (filing date: 2020-03-11), 10-K (filing date: 2019-03-13), 10-K (filing date: 2018-03-14), 10-K (filing date: 2017-03-08), 10-K (filing date: 2016-03-11), 10-K (filing date: 2015-03-13).

¹ Economic profit. See details »

² 2020 Calculation
Economic profit margin = 100 × Economic profit ÷ Sales
= 100 × 2,171 ÷ 77,130 = 2.82%

³ Click competitor name to see calculations.

Performance 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.	Target Corp.’s economic profit margin improved from 2018 to 2019 and from 2019 to 2020.

Target Corp. (NYSE:TGT)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin