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An analyst is estimating the ROIC of a company that has zero fixed costs per unit and pays no taxes. The analyst makes the following
An analyst is estimating the ROIC of a company that has zero fixed costs per unit and pays no taxes. The analyst makes the following forecasts: Sales next year will equal units and will increase at percent for each of the two following years. Prices per unit will be $ $ and $ which simply embody inflation forecasts. Costs per unit will be constant at $ Current capital invested is $ and the firm will reinvest percent of profits. What is the ROIC for each of the three years? If this is a competitive industry, are the results realistic?
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