In: Finance
KFS has two divisions. Both have current sales of $2,000 million, current expected
growth of 6%, and a WACC of 11%. Division A has high profitability (OP = 7%)
but high capital requirement (CR = 88%). Division B has low profitability (OP =
5%) but low capital requirements (CR = 37%).
1. Given the current growth rate of 6%, determine the intrinsic MVA of each division.
2. What is the intrinsic MVA of each division if growth is instead of 7%?
3. What is the EROIC of each division for 6% growth and for 7% growth?
4. How is this related to intrinsic MVA?