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5
Valuation: Measuring and Managing the Value of Companies, Sixth Edition
Chapter 6 Return on Invested Capital
Solutions
1. Since the primary sources of increased value tend to be expanding the market or increasing
2. Automobile manufacturers offer new innovations every year, and some are quite significant,
such as hybrid cars, but the companies do not have success in producing high ROIC. Phone
3. Pharmaceutical and biotechnology firms can patent their products for 20 years. During those
4. It is true that quality matters when establishing a brand; however, once the brand is established
5. The increase in median ROIC and the widening of the distribution of ROICs are the result of a
6. Goodwill is a nonproductive asset. If it is excluded from capital, that change would increase
ROIC. The ROICs with goodwill have been relatively flat, but the ROICs without goodwill have
7. The increase in ROIC of the low-ROIC firms comes from their eroding the competitive advantage
of the top ROIC earners whose ROICs had declined.
8. Health care facility companies have had to deal with increasing government regulation,
insurance companies, and competition from nonprofit organizations. They also suffer from the
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