330.

236 Advanced Financial Planning and Control

ao.Univ.Prof. Mag. DDr. Thomas Dangl

Vorname: ......................

Nachname: ......................

Matrikelnummer: ......................

Studienkennzahl: ......................

Problem 1 (36 %):

Consider a firm that shows the following historic accounting figures:
2012 2013 2014
IC 30,000,000.00 ? ?
Net Investment ? 5,000,000.00
ROIC 14.00% 14.00%
NOPLAT ? ?
FCF 0.00 ?
Please answer the following questions:

a) What was the firm’s net investment in 2013?

b) What was the firm’s invested capital in 2013 and 2014?

c) What was the firm’s NOPLAT in 2013 and 2014?

d) What was the firm’s free cash flow in 2014?

e) Assume in 2013 and 2014 the firm had capital costs of WACC = 12%.
Did the firm create value in 2013 and 2014? How large was the creation
/ destruction of value in 2013 and 2014, respectively? Use the concept of
economic profit to answer this question.

f) Assume that after 2014 the ROIC=RONIC of the firm declines to 12% while
WACC is stable at 12% in the remaining future. What is the firm value at
the end of year 2014?

1
Problem 2 (36 %):
Consider a firm with ROIC = RONIC = 15%. Its cost of capital are constant given
by WACC = 20%. Invested capital at time t = 0 equals EUR 1,000,000.00.
Please answer the following questions:

a) Assume the firm plans to grow at a rate of 15%. What is the firm’s Free
cash flow at time t = 1 (FCF1 )?

b) Now assume the firm plans to grow at a rate of 10%. What is the firm’s Free
cash flow at time t = 1 and what is the Economic profit at t = 1?

c) Assume again a planned growth rate of 10%. What is the required invest-
ment rate?

d) Assume again a planned growth rate of 10%. What is the time t = 0 firm
value calculated as the sum of discounted Free cash flow?

e) Is the firm creating value over its life time? What is the magnitude of value
creation / destruction (= the net present value) at a growth rate of g = 10%?

f) If the growth rate g has to be chosen between 0 and WACC, i.e., g ∈

[0, WACC), what is the value maximizing growth strategy of the firm?

Problem 3 (28 %):

Answer the following questions:

a) What is the definition of Return on new invested capital, RONIC? (be care-
ful with the time-stamp of the accounting numbers).

b) What is the definition of Net Investment.

c) Is a negative Free cash flow at some time t a non-ambiguous signal of a

badly managed firm (i.e., a firm that destroys value)? Give a detailed de-
scription of your arguments.

d) Is the following proposition correct: A firm with RONIC<ROIC should not

plan to grow, because growth will certainly destroy value!