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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 Ratio
Economic Profit Margin

Union Pacific Corp., economic profit calculation

US$ in millions

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Net operating profit after taxes (NOPAT)¹	7,558)	8,288)	7,625)	6,650)	7,369)
Cost of capital²	13.09%	12.85%	12.91%	12.80%	12.88%
Invested capital³	61,524)	59,751)	58,241)	58,340)	57,204)

Economic profit⁴	(496)	613)	108)	(816)	—)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 7,558 – 13.09% × 61,524 = -496

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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.	Union Pacific Corp. economic profit increased from 2021 to 2022 but then decreased significantly from 2022 to 2023.

Union Pacific Corp., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Net income	6,379)	6,998)	6,523)	5,349)	5,919)
Deferred income tax expense (benefit)¹	117)	262)	154)	340)	566)
Increase (decrease) in allowance for doubtful accounts²	(1)	—)	(7)	13)	1)
Increase (decrease) in equity equivalents³	116)	262)	147)	353)	567)
Interest expense	1,340)	1,271)	1,157)	1,141)	1,050)
Interest expense, operating lease liability⁴	58)	54)	56)	59)	68)
Adjusted interest expense	1,398)	1,325)	1,213)	1,200)	1,118)
Tax benefit of interest expense⁵	(293)	(278)	(255)	(252)	(235)
Adjusted interest expense, after taxes⁶	1,104)	1,047)	958)	948)	883)
Interest income	(52)	(23)	(4)	—)	—)
Investment income, before taxes	(52)	(23)	(4)	—)	—)
Tax expense (benefit) of investment income⁷	11)	5)	1)	—)	—)
Investment income, after taxes⁸	(41)	(18)	(3)	—)	—)
Net operating profit after taxes (NOPAT)	7,558)	8,288)	7,625)	6,650)	7,369)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Elimination of deferred tax expense. See details »

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

³ Addition of increase (decrease) in equity equivalents to net income.

⁴ 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,600 × 3.60% = 58

⁵ 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,398 × 21.00% = 293

⁶ Addition of after taxes interest expense to net income.

⁷ 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 52 × 21.00% = 11

⁸ Elimination of after taxes investment income.

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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.	Union Pacific Corp. NOPAT increased from 2021 to 2022 but then decreased significantly from 2022 to 2023.

Union Pacific Corp., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Income tax expense	1,854)	2,074)	1,955)	1,631)	1,828)
Less: Deferred income tax expense (benefit)	117)	262)	154)	340)	566)
Add: Tax savings from interest expense	293)	278)	255)	252)	235)
Less: Tax imposed on investment income	11)	5)	1)	—)	—)
Cash operating taxes	2,020)	2,085)	2,055)	1,543)	1,497)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

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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.	Union Pacific Corp. cash operating taxes increased from 2021 to 2022 but then decreased significantly from 2022 to 2023.

Union Pacific Corp., invested capital calculation (financing approach)

US$ in millions

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Debt due within one year	1,423)	1,678)	2,166)	1,069)	1,257)
Debt due after one year	31,156)	31,648)	27,563)	25,660)	23,943)
Operating lease liability¹	1,600)	1,631)	1,759)	1,604)	1,833)
Total reported debt & leases	34,179)	34,957)	31,488)	28,333)	27,033)
Common shareholders’ equity	14,788)	12,163)	14,161)	16,958)	18,128)
Net deferred tax (assets) liabilities²	13,123)	13,033)	12,675)	12,247)	11,992)
Allowance for doubtful accounts³	9)	10)	10)	17)	4)
Equity equivalents⁴	13,132)	13,043)	12,685)	12,264)	11,996)
Accumulated other comprehensive (income) loss, net of tax⁵	614)	582)	914)	1,593)	1,356)
Adjusted common shareholders’ equity	28,534)	25,788)	27,760)	30,815)	31,480)
Construction in progress⁶	(1,173)	(948)	(961)	(748)	(1,249)
Short-term investments⁷	(16)	(46)	(46)	(60)	(60)
Invested capital	61,524)	59,751)	58,241)	58,340)	57,204)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of equity equivalents to common shareholders’ equity.

⁵ Removal of accumulated other comprehensive income.

⁶ Subtraction of construction in progress.

⁷ Subtraction of short-term investments.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Union Pacific Corp. invested capital increased from 2021 to 2022 and from 2022 to 2023.

Union Pacific Corp., cost of capital calculations

Dec 31, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	152,109)	152,109)	÷	182,209)	=	0.83	0.83	×	14.60%	=	12.19%
Debt³	28,500)	28,500)	÷	182,209)	=	0.16	0.16	×	7.07% × (1 – 21.00%)	=	0.87%
Operating lease liability⁴	1,600)	1,600)	÷	182,209)	=	0.01	0.01	×	3.60% × (1 – 21.00%)	=	0.02%
Total:	182,209)					1.00					13.09%

Based on: 10-K (reporting date: 2023-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	125,740)	125,740)	÷	155,471)	=	0.81	0.81	×	14.60%	=	11.81%
Debt³	28,100)	28,100)	÷	155,471)	=	0.18	0.18	×	7.05% × (1 – 21.00%)	=	1.01%
Operating lease liability⁴	1,631)	1,631)	÷	155,471)	=	0.01	0.01	×	3.30% × (1 – 21.00%)	=	0.03%
Total:	155,471)					1.00					12.85%

Based on: 10-K (reporting date: 2022-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	154,378)	154,378)	÷	189,037)	=	0.82	0.82	×	14.60%	=	11.93%
Debt³	32,900)	32,900)	÷	189,037)	=	0.17	0.17	×	6.96% × (1 – 21.00%)	=	0.96%
Operating lease liability⁴	1,759)	1,759)	÷	189,037)	=	0.01	0.01	×	3.20% × (1 – 21.00%)	=	0.02%
Total:	189,037)					1.00					12.91%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	136,779)	136,779)	÷	170,283)	=	0.80	0.80	×	14.60%	=	11.73%
Debt³	31,900)	31,900)	÷	170,283)	=	0.19	0.19	×	7.02% × (1 – 21.00%)	=	1.04%
Operating lease liability⁴	1,604)	1,604)	÷	170,283)	=	0.01	0.01	×	3.70% × (1 – 21.00%)	=	0.03%
Total:	170,283)					1.00					12.80%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	126,891)	126,891)	÷	155,924)	=	0.81	0.81	×	14.60%	=	11.88%
Debt³	27,200)	27,200)	÷	155,924)	=	0.17	0.17	×	6.99% × (1 – 21.00%)	=	0.96%
Operating lease liability⁴	1,833)	1,833)	÷	155,924)	=	0.01	0.01	×	3.70% × (1 – 21.00%)	=	0.03%
Total:	155,924)					1.00					12.88%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Union Pacific Corp., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in millions)
Economic profit¹	(496)	613)	108)	(816)	—)
Invested capital²	61,524)	59,751)	58,241)	58,340)	57,204)
Performance Ratio
Economic spread ratio³	-0.81%	1.03%	0.19%	-1.40%	0.00%
Benchmarks
Economic Spread Ratio, Competitors⁴
FedEx Corp.	-3.79%	-3.56%	-0.76%	-5.73%	-8.38%
Uber Technologies Inc.	-0.73%	-70.93%	-20.11%	-47.24%	-55.75%
United Parcel Service Inc.	4.41%	15.59%	21.37%	-8.73%	2.72%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -496 ÷ 61,524 = -0.81%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Union Pacific Corp. economic spread ratio improved from 2021 to 2022 but then deteriorated significantly from 2022 to 2023.

Union Pacific Corp., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in millions)
Economic profit¹	(496)	613)	108)	(816)	—)
Operating revenues	24,119)	24,875)	21,804)	19,533)	21,708)
Performance Ratio
Economic profit margin²	-2.05%	2.47%	0.50%	-4.18%	0.00%
Benchmarks
Economic Profit Margin, Competitors³
FedEx Corp.	-2.93%	-2.53%	-0.58%	-4.77%	-6.38%
Uber Technologies Inc.	-0.31%	-36.36%	-18.53%	-89.22%	-80.67%
United Parcel Service Inc.	2.21%	6.96%	9.75%	-3.42%	1.33%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Economic profit. See details »

² 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Operating revenues
= 100 × -496 ÷ 24,119 = -2.05%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Union Pacific Corp. economic profit margin improved from 2021 to 2022 but then deteriorated significantly from 2022 to 2023.

Union Pacific Corp. (NYSE:UNP)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin