Ravi's Hardware Stores is evaluating the performance of its stores using return on invested capital (ROIC) and economic profit. One store has a ROIC of 18% but only earns an economic profit of 14% due to its higher cost of capital. While Ravi's sister Rita is growing sales aggressively, her stores have a lower ROIC and declining economic profit due to higher investment and lower returns. Investing in a new hardware store may initially lower profits but result in greater economic profits later according to a discounted cashflow analysis. Fundamentally, value is created by earning returns above the cost of capital on investments.