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Presentation Case 15 Questions G H I[1]


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Presentation Case 15 Questions G H I[1]

  1. 1. G. Explain what value-based management <br />The main purpose is of VBM is to increase market value added to the MVA… VBM is a application valuation in regards to corporate decisions and initiatives <br />
  2. 2. H. What are the four value drivers? How does each of them affect value?<br />The 4 value drivers are WACC, sales growth, operating profitability, and capital requirements The MVA will improve if the WACC is reduced. Operating profit increased and capital decreases<br />
  3. 3. I. What is the expected return on invested capital (EROIC)? Why is the spread between EROIC and WACC so important?<br />EROIC is a measure of the amount of NOPAT that each dollar of operating capital generates. The spread between EROIC and WACC is important because it is an indication of MVA. The goal of any company is to maximize shareholder wealth, and thus to maximize MVA.<br />