NOPAT
NOPAT
Short definition
NOPAT is operating profit after a finance-independent tax. It is the numerator of FCFF and ROIC; it may differ from cash tax paid.
Detailed explanation
EBIT × (1 − T) leaves the interest tax shield in WACC, so FCFF must not also deduct interest. Loss carry-forwards, incentives and inflation restatement pull cash tax off this formula; then NOPAT = EBIT − cash operating tax is more honest.
NOPAT is accrual. A receivable build can lift NOPAT without cash; ΔNWC is deducted separately in FCFF.
Why it matters for the CFO
It is the shared numerator of DCF and ROIC. A wrong T breaks both value and the “return above WACC” claim. Counting the shield in NOPAT and again in WACC is double counting.
How it is calculated
NOPAT = FVÖK × (1 − T)
T may be the statutory marginal rate or a sustainable cash-tax rate; do not mix them. Interest is not in this line.
Variables in the formula
- NOPAT: Net operating profit after tax
- EBIT: EBIT
- T: Marginal corporate tax rate (cash tax may differ)
How to read it
If the effective rate is below T, NOPAT is fat until the incentive expires. On negative EBIT, (1 − T) implies a tax asset; usability must be tested.
Numerical example
EBIT 80 mn TL, T = 25% → NOPAT = 80 × 0.75 = 60 mn TL.
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Definitions are educational. They are not investment, credit or tax advice.