Build a two-variable table showing the value of a company whoseafter-tax profit is $1,000 for different values of g and ROIC.Assume r, the discount rate, is 10%.
ROIC (horizontal axis): between 6% and 16% (increments of 2%) g(vertical axis): between 0 and 8% (increments of 2%)
Use Excel’s Data Table function in the Data/What-if Analysistab
Questions:
1. What do you notice when g increases? Explain.
2. What happens when r = ROIC? Why is that so?
