Historical Average and Projected Returns on Capital

You have been asked to judge the quality of the projects available at Super Meats, a meat processing company. It has earned an average return on capital of 10% over the last 5

years, but its marginal return on capital last year was 14%. The industry average return on capital is 12%, and it is expected that Super Meats will earn this return on its projects over the next 5 years. If the cost of capital is 12.5%, which of the following conclusions would you draw about Super Meat's projects a. It invested in good projects over the last 5 years b. It invested in good projects last year c. It can expect to invest in good projects over the next 5 years

In terms of setting dividend policy, which of these conclusions matter the most?

Lessons From The Intelligent Investor

Lessons From The Intelligent Investor

If you're like a lot of people watching the recession unfold, you have likely started to look at your finances under a microscope. Perhaps you have started saving the annual savings rate by people has started to recover a bit.

Get My Free Ebook


Post a comment