A company has a net EBIT of EUR1bn and has a capital employed (CE) of 10bn EUR. The weighted average cost of capital (WACC) is 12%. Define whether this creates or destroys value. Determine the amount of value created or destroyed. How would you explain to the managers of this company that generates EUR1bn of net EBIT that they are destroying value. What are the driver for this company to create value?.
A company has a net EBIT of EUR1bn and has a capital employed (CE) of 10bn EUR. The weighted average cost of capital (WACC) is 12%. Define whether this creates or destroys value. Determine the amount of value created or destroyed. How would you explain to the managers of this company that generates EUR1bn of net EBIT that they are destroying value. What are the driver for this company to create value?.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A company has a net EBIT of EUR1bn and has a capital employed (CE) of 10bn EUR. The weighted average cost of capital (WACC) is 12%.
- Define whether this creates or destroys value.
- Determine the amount of value created or destroyed.
- How would you explain to the managers of this company that generates EUR1bn of net EBIT that they are destroying value.
- What are the driver for this company to create value?.
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