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Microsoft Excel LibreOffice Calc

Target Corp. (NYSE:TGT)


Economic Value Added (EVA)

Advanced level

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

Target Corp., economic profit calculation

US$ in millions

Microsoft Excel LibreOffice Calc
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
Cost of capital2
Invested capital3
 
Economic profit4

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
= × =

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.

Net Operating Profit after Taxes (NOPAT)

Target Corp., NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Feb 1, 2020 Feb 2, 2019 Feb 3, 2018 Jan 28, 2017 Jan 30, 2016 Jan 31, 2015
Net earnings (loss)
Deferred income tax expense (benefit)1
Increase (decrease) in equity equivalents2
Net interest expense
Interest expense, operating lease liability3
Adjusted net interest expense
Tax benefit of net interest expense4
Adjusted net interest expense, after taxes5
(Income) loss from discontinued operations, net of tax6
Net operating profit after taxes (NOPAT)

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
= × =

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

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.

Cash Operating Taxes

Target Corp., cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
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
Less: Deferred income tax expense (benefit)
Add: Tax savings from net interest expense
Cash operating taxes

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.

Invested Capital

Target Corp., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel LibreOffice Calc
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
Long-term debt and other borrowings, excluding current portion
Operating lease liability1
Total reported debt & leases
Shareholders’ investment
Net deferred tax (assets) liabilities2
Equity equivalents3
Accumulated other comprehensive (income) loss, net of tax4
Adjusted shareholders’ investment
Construction-in-progress5
Invested capital

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.

Cost of Capital

Target Corp., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Debt3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

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 ÷ = × =
Debt3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

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 ÷ = × =
Debt3 ÷ = × × (1 – 33.70%) =
Operating lease liability4 ÷ = × × (1 – 33.70%) =
Total:

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 ÷ = × =
Debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

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 ÷ = × =
Debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

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 ÷ = × =
Debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

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 »


Economic Spread Ratio

Target Corp., economic spread ratio calculation

Microsoft Excel LibreOffice Calc
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
Invested capital2
Performance Ratio
Economic spread ratio3

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 × ÷ =

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.

Economic Profit Margin

Target Corp., economic profit margin calculation

Microsoft Excel LibreOffice Calc
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
Sales
Performance Ratio
Economic profit margin2

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 × ÷ =

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.