One company that improved its EVA performance dramatically during the 1990s is IBM. In 1993, its EVA was a negative $13 billion. By 2000, the company improved its EVA to $2.2 billion. Like most companies, the economic downturn in the early 2000s hurt its EVA, dropping it into the negative range by 2002. By 2005, IBM again had a positive EVA at just under $1 billion. Compute the EVA for IBM using the following data (in billions of dollars) without any of the specific adjustments recommended by Stern Stewart. As a manager, how would you explain the past history of EVA and the current EVA to investors?

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Net operating profit after tax Invested capital Cost of capital (assumed) $12.8 67 10%