EVA %

Formal

The difference between the IRR of an investment proposal and the business’s own minimum Minimum return (pa%) - with the answer expressed as a percentage. Put differently, it refers to the excess or shortfall in the rate of return generated from a proposal against the company’s own cost of capital. A positive EVA% generates a surplus and therefore is likely to be accepted. A negative means that the cost of funds is higher than the returns so the proposal is likely to be declined.

Real-world Example

A division reports an EVA of $200k on $8M of capital employed - an EVA% of 2.5%, showing the rate at which it's creating value above its cost of capital, comparable across divisions of different sizes.