Assume that today is Jan 1,2018 and $1,000 is initially invested in 2018 to create the firm Bari Incorporated. In 2018, Bari has a ROIC of 16%. It knows its WACC is 8% so it decides to grow. The firm plans to grow at 4% every year, starting in 2019 (next year). The firm estimates that RONIC for 2019 and all future years will be the same as its 2018 ROIC.  However, the firm is bad at forecasting and will not achieve the 16% RONIC. Instead, the firm ends up with a realized 2019 RONIC of only 10%. It still assumes however that it will hit its 16% RONIC target in 2020. What is the firm's invested capital at the end of 2019?

Answer rating: 100% (QA)

To calculate the invested capital at the end of 2019 we need to first calc... View the full answer