VBV and Return Spread

Value/BV Ratios and Return Spreads

5.00

4.50

4.00

Value/BV Ratio

3.50

3.00
WACC=8%

2.50

WACC=10%
WACC=12%

2.00

1.50

1.00

0.50

-2%

-1%

0%

1%

2%

3%

4%

5%

ROC - WACC

Page 1

6%

7%

8%

9%

10%

Input

Inputs
ROC
WACC
g

11%
12%
5%

Output
Value/BV
0.857142857

ROC-WACC
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%

WACC=8%
0.33
0.67
100%
133%
167%
200%
233%
267%
300%
333%
367%
400%
433%

Page 2

WACC=10%
0.6
0.8
1
1.2
1.4
1.6
1.8
2
2.2
2.4
2.6
2.8
3

WACC=12%
0.71
0.855
1
1.145
1.29
1.435
1.58
1.725
1.87
2.015
2.16
2.305
2.45