For which type of company is additional growth likely to create more value: a high-ROIC company in a mature market or a low-ROIC company in a fast-growing market? Give reasons for your answer.
Answer to relevant QuestionsWhy could growth through a series of bolt-on acquisitions create more value than growth through a single large acquisition? (Consider premium paid and synergies created for each individual transaction.) Exhibit 6.18 presents the income statement and reorganized balance sheet for BrandCo, an $800 million consumer products company. Using the methodology outlined in Exhibit 6.5, determine NOPLAT for year 1. Assume an operating ...Exhibit 7.15 presents the income statement and balance sheet for Companies A, B, and C. Compute each company’s return on assets, return on equity, and return on invested capital. Based on the three ratios, which company ...Using the data presented in Question 1, decompose ROIC into operating margin and capital turnover for each company. Which ratio is the key determinant of ROIC: operating margin or capital turnover? The chief financial officer of PartsCo has asked you to rerun the forecast of the company's income statement and balance sheet at a growth rate of 5 percent. If the company generates more cash than it needs, how can the ...
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