Question: hey team. please solve this two question with numerical examples so that i can easily understand and do that. Overview: Companies exist to meet customer
Overview: Companies exist to meet customer needs in a way that translates into reliable returns to investors. When people invest they expect their investment to increase by an amount that sufficiently compensate them for the risk they took, as well as for the time value of their money (i.e.. TVM). Therefore, knowing how to create and measure value is an essential tool for managers and executives. Fact 1: The faster companies can grow their revenues and deploy more capital at attractive rates of return, the more value they create. The combination of growth and return on invested capital (ROIC) drives value and value creation. Question 1: Comprehensively explain, using numerical examples, why companies create value by investing capital, from investors, to generate future cash flow at rate of return exceeding the cost of capital. Fact 2: Anything that doesn't increase cash flows, via improving revenues and returns on capital, doesn't create value. Question 2: Comprehensively explain, using numerical examples, how, as a corrolary to Fact 1, value is created by companies, for shareholders, when companies generate higher cash flows, not when rearanging investors' claims on those cash flows
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