Interesting, that there should be an equilibrium condition among the three value fundamentals, – #g, #ROIC & #WACC.
The chart would be more familiar for economists.
to translate it:
r – #WACC
R- Average #ROIC
ROI – #Marginal ROIC
NI – Net #Investment
There is an optimal NI level, when Marginal #ROIC = #WACC, meaning that organization reached condition, where it is no more ease to find positive NPV projects. Very next project has lower #ROIC, but it is still reasonable to invest till #ROIC becomes same as #WACC.
Growth depends on the investment rate (Part of Earnings) and #ROIC, (g = IR*R). So, at the equilibrium point, #WACC defines optimal #NI, #ROIC and Growth… maybe…
Sourse of Chart:
Venture Capital & the Finance of Innovation
Andrew Metrick & Ayako Yasuda
Second Edition
Sources, Venture Capital & the Finance of Innovation - by A. Metrick & A. Yasuda, Growth, ROIC, VC Valuation, WACC, CoC, Structure
Equilibrium