JetCo is a manufacturer of high-speed aircraft. The company generates $100 million in operating profit on $600 million of revenue and $800 million of invested capital. JetCo’s primary competitor, Gulf Aviation, generates $100 million in NOPLAT on $800 million in revenue. Gulf Aviation has $600 million in invested capital. Based on the preceding data, which company is creating more value? Assume an operating tax rate of 25 percent and cost of capital of 8 percent.
Answer to relevant QuestionsUsing 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? Using an Internet search tool, locate Procter & Gamble's investor relations web site. Under "Financial Reporting," you will find the company's 2009 annual report. In 2009, the company reported $8.6 billion in "accrued and ...Since growth is stable for ApparelCo, you decide to start the continuing value with year 3 cash flows (i.e., cash flows in year 3 and beyond are part of the continuing value). Using the key value driver formula (and data ...In 2009, the median price-to-earnings ratio for the S&P 500 was 11.1. If the long-run return on equity is 13.5 percent and the long-run growth in GDP is expected to be 6.7 percent (3.5 percent real growth and 3.2 percent ...You are valuing DistressCo, a company struggling to hold market share. The company currently generates $120 million in revenue, but its revenue is expected to shrink to $100 million next year. Cost of sales currently equals ...
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