Value based management Chapter 3 & 12, SFM Value
Author : myesha-ticknor | Published Date : 2025-06-16
Description: Value based management Chapter 3 12 SFM Value Measures Return on Invested Capital Economic Value Added Market Value Added Cash Flow Return On Investment Cash Value Added Market to Capital Ratio Total Shareholders Return Future
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Transcript:Value based management Chapter 3 & 12, SFM Value:
Value based management Chapter 3 & 12, SFM Value Measures Return on Invested Capital Economic Value Added Market Value Added Cash Flow Return On Investment Cash Value Added Market – to – Capital Ratio Total Shareholders’ Return Future Growth Value Wealth Added Index ROIC EVA MVA CFROI CVA MCR TSR FGV WAI Return on Invested Capital (ROIC) ROIC is an indicator of Operating performance of the company. Return on Invested Capital (ROIC) ROIC is a indicator of Operating performance of the company. ROIC = NOPLAT / Invested Capital Where, NOPLAT or NOPAT = Net EBIT – Taxes on Net EBIT Net EBIT = EBIT – NOI* + NOE* (*EBIT need to be adjusted for NOI/E if they are already included in EBIT) ‘Invested Capital’ is also called as ‘Operating Invested Capital’ OIC = Total Operating Assets Or, OIC = Total Assets – Non Operating Assets – Excess Cash & Mktbl. Secs. Or, OIC = NFA + NCA Return on Invested Capital (ROIC) ROIC = NOPLAT / Invested Capital A company has an EBIT of Rs. 2 cr. It included interest income Rs. 0.1 cr. And non operating expenses of Rs. 0.2 cr. The total assets of the company is Rs. 5 cr. The company has capital work in progress worth Rs. 1 cr; Marketaable securities of Rs. 0.5 cr. and Cash worth Rs. 0.25 cr. In excess of working capital requirement. Tax 30%. Find out ROIC. Net EBIT = 2 – 0.1 + 0.2 = Rs. 2.1 cr. NOPLAT = 2.1 – (2.1*0.3) = Rs. 1.47 cr. OIC = 5 – 1 – 0.5 – 0.25 = Rs. 3.25 cr. ROIC = 1.47 / 3.25 = 45% A company has an ROIC of 16%, EBIT of RS. 100000 and interest income of Rs. 15000, WACC of 12%. What is the value of Invested capital, assuming the tax rate at 20%? ANS: 4,25,000 If a company enjoys an ROIC of 20% with a capital investment of Rs. 5,00,000 and earns an EVA of Rs. 55,000 then find out it's cost of capital (WACC). ANS: 9% A company earns an EVA of Rs. 1,00,000 with an invested capital of rs. 4,00,000 sourced at a cost of 10%, then find out it's ROIC? ANS: 35% A company earns an EVA of Rs. 1,00,000 with an invested capital of rs. 5,00,000 sourced at a cost of 10%, then find out it's NOPLAT? ANS: 1,50,000
