JetCo is a manufacturer of high speed aircraft. The company generates $100 million in operating profit on $600 million of revenue and $800 million of invested capital. JetCos primary competitor Gulf Aviation also generates $100 million in NOPLAT. Gulf Aviation is slightly larger; the company recorded $800 million in revenue. Gulf Aviation has $600 million in invested capital.

DefenseCo announces a purchase of Gulf Aviation for $1.1 billion in cash. Consequently, Gulf Aviations invested capital with goodwill and acquired intangibles rises from $600 to $1.1 billion. Next year, while conducting its annual review of Gulf Aviation, senior management at DefenseCo asks you the following questions: Based on the profitability figures presented in Question 1, is Gulf Aviation creating value for DefenseCo? Which company, JetCo or Gulf Aviation, has the best financial performance in the industry?