Residual Return on Capital (RROC)
= EVA / Capital
= Economic Profit/ Capital
= (NOPAT - $WACC) / Capital
(e.g.)
NOPAT = $42 million
Capital (Total adjusted capital base) = $200 million
WACC = 12.0%
$WACC = WACC * Capital = 12.0% * $200 million = $24 million
Residual Return on Capital (RROC) = ($42 million - $24 million)/$200 million = 18/200 = 9.00%
Sunday, February 6, 2011
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