Why do companies operating within the pharmaceutical and biotechnology industries typically sustain higher ROICs than firms in the technology, hardware, and equipment industries?
Answer to relevant QuestionsWhy are competitive advantages based on brands, as in the consumer goods industry, often more important for long-term value creation than advantages based on product quality or innovation? Why 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.) Using free cash flow computed in Question 1 and the weighted average cost of capital computed in Question 2, estimate BrandCo’s enterprise value using the growing-perpetuity formula. Assume free cash flow grows at 5 ...Exhibit 7.16 presents the income statement and balance sheet for HealthCo,a $665 million health care company. Compute NOPLAT, average invested capital, and ROIC. Assume an operating tax rate of 25 percent and a marginal tax ...Which interest coverage ratio, EBITDA to interest or EBITA to interest, will lead to a higher number? When is the EBITDA interest ratio more appropriate than the EBITA ratio? When is the EBITA interest coverage ratio more ...
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