ROIC
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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 – #WACCR- Average #ROICROI – #Marginal ROICNI – Net #Investment There is an optimal NI level, when Marginal #ROIC = #WACC, meaning that organization reached condition,…
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One crucial question that arises during organizational valuation is how to forecast ROIC in the stable growth phase? For example, if we assume zero real growth in the horizon, as it is logical in many scenarios, wouldn’t it be incorrect to assume ROIC=WACC? In practice, this isn’t the case for two main reasons: How should…