Cyberproblem

ROIC and WACC

A key principal in value-based management is that value is created when a company earns more on its capital than its investors require. In other words, value is created when the ROIC is greater than the WACC.

Let's take a look at the ROIC and WACC for some particular companies and see which companies are creating value. Stern Stewart & Co. have the most comprehensive source of data for ROIC and WACC. Go to the Stern Stewart & Co. Web site at http://www.sternstewart.com. On the left side of the page there is a menu of subjects. Select "Performance Rankings" and then "Ranking Files." For the United States row, select the link to Ranking File. Please take note that you need Adobe Acrobat Reader to be able to view the PDF file. Also, you can save a copy of this file to your hard drive by right-clicking instead of the normal click.

1. According to Stern Stewart, which U.S. companies are ranked in the top ten for adding the most market, based on MVA?
2. According to Stern Stewart, which U.S. companies are ranked in the bottom ten for the lowest MVA?
3. What relationship do you see between the spread (i.e., ROIC-WACC)?