NOPAT

NOPAT (net operating profit after tax) is operating profit adjusted for tax but before financing costs. It is the standard starting profit figure used to compute economic value added and similar divisional return measures.

ByHoang TruongUpdated July 5, 2026

See it move

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Division Echo reports operating profit of €800,000, taxed at 25% as if the business carried no debt at all. NOPAT is €800,000 times (1 minus 0.25), or €800,000 times 0.75, giving €600,000. Interest expense never enters this figure, since it is deliberately excluded from the calculation.

Where it fits

SubjectManagerial AccountingAdvancedTopicDivisional Performance MeasurementAdvanced

The formula

LaTeX

NOPAT = EBIT \times (1 - t)

Variables

$N O P A T$: Net operating profit after tax (€)
$E B I T$: Operating profit before interest and tax (€)
$t$: Applicable tax rate (decimal (%))

Operating profit taxed as if the business had no debt, ignoring interest expense entirely.

Check yourself

PracticeCORE

Division Foxtrot has operating profit (EBIT) of €1,200,000. It also pays €150,000 of interest on a divisional loan. The tax rate is 20%. What is Foxtrot's NOPAT?

Select an answer to check your understanding.