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Valuation: Measuring and Managing the Value of Companies, Fifth Edition
Chapter 4 Solutions
Return on Invested Capital
1. Since expanding the market or increasing consumption by current customers tend to be
2. Unless the innovation is patentable or difficult to copy, an innovation will not produce
very high or lasting higher ROIC or value for a company. Customer lock-in usually will
3. Pharmaceutical and biotechnology firms can patent their products for 20 years. During
4. It is true that quality matters when establishing a brand; however, once the brand is
5. The widening is the result of more companies earning a very high ROIC. This appears to
6. Goodwill is a nonproductive asset. If it is excluded from capital, that change would
increase ROIC. The ROICs with goodwill have been flat, but the ROICs without
7. The increase in ROIC of the low-ROIC firms comes from their eroding the competitive
8. Health-care facility companies have had to deal with increasing government regulation,
5
