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
Economic Profit Margin

United Technologies Corp., economic profit calculation

USD $ in millions

	12 months ended	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Net operating profit after taxes (NOPAT)¹
	Cost of capital²
	Invested capital³

	Economic profit⁴

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-05).

2018 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.	United Technologies Corp.’s economic profit declined from 2016 to 2017 and from 2017 to 2018.

United Technologies Corp., NOPAT calculation

USD $ in millions

	12 months ended	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Net income attributable to common shareowners
	Deferred income tax expense (benefit)¹
	Increase (decrease) in allowance for doubtful accounts²
	Increase (decrease) in LIFO reserve³
	Increase (decrease) in service and product warranties and product performance guarantees⁴
	Increase (decrease) in accrued restructuring costs⁵
	Increase (decrease) in equity equivalents⁶
	Interest expense
	Interest expense, operating lease obligations⁷
	Adjusted interest expense
	Tax benefit of interest expense⁸
	Adjusted interest expense, after taxes⁹
	(Gain) loss on marketable securities
	Interest income
	Investment income, before taxes
	Tax expense (benefit) of investment income¹⁰
	Investment income, after taxes¹¹
	(Income) loss from discontinued operations, net of tax¹²
	Net income (loss) attributable to noncontrolling interest
	Net operating profit after taxes (NOPAT)

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-05).

2018 Calculations

¹ Elimination of deferred tax expense. See Details »

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

³ Addition of increase (decrease) in LIFO reserve. See Details »

⁴ Addition of increase (decrease) in service and product warranties and product performance guarantees.

⁵ Addition of increase (decrease) in accrued restructuring costs.

⁶ Addition of increase (decrease) in equity equivalents to net income attributable to common shareowners.

⁷ Addition of interest expense on capitalized operating leases. See Details »

⁸ Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= hidden × 21.00% = hidden

⁹ Addition of after taxes interest expense to net income attributable to common shareowners.

¹⁰ Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 21.00% = hidden

¹¹ Elimination of after taxes investment income.

¹² 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.	United Technologies Corp.’s NOPAT declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

United Technologies Corp., cash operating taxes calculation

USD $ in millions

	12 months ended	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Income tax expense
	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: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-05).

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.	United Technologies Corp.’s cash operating taxes increased from 2016 to 2017 but then slightly declined from 2017 to 2018 not reaching 2016 level.

United Technologies Corp., invested capital calculation (financing approach)

USD $ in millions

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Short-term borrowings
	Long-term debt currently due
	Long-term debt, excluding currently due
	PV of operating lease payments¹
	Total reported debt & leases
	Shareowners’ equity
	Net deferred tax (assets) liabilities²
	Allowance for doubtful accounts³
	LIFO reserve⁴
	Service and product warranties and product performance guarantees⁵
	Accrued restructuring costs⁶
	Equity equivalents⁷
	Accumulated other comprehensive (income) loss, net of tax⁸
	Redeemable noncontrolling interest
	Noncontrolling interest
	Adjusted shareowners’ equity
	Available-for-sale securities⁹
	Invested capital

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-05).

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 LIFO reserve. See Details »

⁵ Addition of service and product warranties and product performance guarantees.

⁶ Addition of accrued restructuring costs.

⁷ Addition of equity equivalents to shareowners’ equity.

⁸ Removal of accumulated other comprehensive income.

⁹ Subtraction of available-for-sale securities.

Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	United Technologies Corp.’s invested capital increased from 2016 to 2017 and from 2017 to 2018.

United Technologies Corp., cost of capital calculations


Equity²	÷	=	×		=
Debt³	÷	=	×	× (1 – 21.00%)	=
PV of operating lease payments⁴	÷	=	×	× (1 – 21.00%)	=
Total:

Based on: 10-K (filing date: 2019-02-07).

¹ USD $ in millions

² Equity. See Details »

³ Debt. See Details »