David KrauseEarnings
Capital tied up
Cost of capital and growth
NOPAT
–
Invested capital
–
ROIC
–
Spread over cost of capital
–
Economic profit per year
–
Self-funded growth
–
Planned investment
Planned investment
With the investment
ROIC afterwards–
Economic profit afterwards–
Change in economic profit–
Minimum EBIT so the investment destroys no value–
Levers compared
| Lever | ROIC | Economic profit |
|---|---|---|
| Starting point | – | – |
| Margin +1 percentage point | – | – |
| Net working capital −10 % | – | – |
| Both | – | – |
Explanation and limits of the metric: ROIC: What the capital in a plant actually earns. Where the cost of capital comes from: yield curve and imputed interest rate. Calculators from an investor's perspective: freebirdcapital.org.
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