Question
The industry or sector can significantly impact the ROIC of a company. Different industries have different capital requirements, risk levels, and profit margins, all of which can affect ROIC. For example, industries with high capital intensity like manufacturing or utilities may have lower ROIC due to high investment costs. On the other hand, sectors like technology or services may have higher ROIC due to lower capital requirements and higher profit margins. Additionally, industry growth rates, competition levels, and regulatory environment can also influence a company's ROIC.
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Do you need to weigh up several investment projects or public companies to invest in? This spreadsheet compares the efficiency of capital use between companies based on assumptions of Return on Invested Capital (ROIC), reinvestment rate and valuation multiples. Then, net income and equity value forecasts are derived and returns are compared over the long term by the company. The sensitivity of returns to the core assumptions is also provided.
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