Firm Value Multiples Page 1 Inputs Before restructurinAfter restructurinRemarks EBIT from existing assets = $7,088 $7,088 ! Operating efficiencies and cost cutting Capital Invested in existing assets $14,967 $14,967 ! Divest useless assets Tax rate = 35% 35% ! Lower tax burden Return on Capital on new investm 25.15% 24% ! Better investments Reinvestment Rate = 32.21% 40% ! Change your reinvestment policy - internal and external (acquisitions) Length of growth period = 5 5 ! Build up competitive advantages Debt Ratio = 1.70% 20% ! Move to an optimal debt ratio Cost of Equity in high growth = 8.42% 9.68% ! Reduce your operating leverage/make your product more discretionary. Change to reflect new debt ratio. Pre-tax Cost of Debt in high grow 5.85% 6.65% ! Match up your debt to your assets. Change your cost to reflect new debt ratio Stable Growth Rate = 5.00% 5.00% ! Cannot be higher than the growth rate of the economy Return on capital in stable growth 15.00% 15.00% ! Change with caution. This is your firm's return on capital forever.
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