Concurrent Business Objectives & 2G1R Profitability
Concurrent Business Objectives & 2G1R Profitability
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The Magnificent Seven :
+ve NCAVPS (Optional, but it is a booster for rapid Growth Capex and M&A deployment)
+ve Gncavps
+ve Gnet_profit
+ve Ginvested_capital
Gnet_profit ≥ Ginvested_capital
Ginvested_capital > CICC
ROIC > CICC
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where,
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Invested Capital
= Total Equity + Total Interest Bearing Debts
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ROIC
= 100 × Net Profit ÷ Invested Capital
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(1)
2G1R Profitability (2G1RP)
(IF THE CONCURRENT OBJECTIVES are FULLY MET)
= ∛(Gnet_profit × Ginvested_capital × ROIC)
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2G1R Profitability VALUE
= 2G1RP × EPS
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(2)
If any Growth is negative temporarily, then :
Factorized 2G1R Profitability (F2G1RP)
(IF ANY GROWTH IS -ve CAUSING THE CONCURRENT OBJECTIVES NOT FULLY MET)
= 100 × { ∛(Gnet_profit Factor × Ginvested_capital Factor × ROIC Factor) - 1 }
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Factorized 2G1R Profitability Value
= F2G1RP × EPS
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(3)
Discounted EPS with 2G1RP or F2G1RP Runway without Growth
= EPS × (Growth Factor÷CICC) × (1 - (Growth Factor÷CICC)^(2G1RP or F2G1RP)) ÷ (1 - Growth Factor÷CICC)
= EPS × (1÷CICC) × (1 - (1÷CICC)^(2G1RP or F2G1RP)) ÷ (1 - 1÷CICC)
= EPS ÷ CICC × (1 - (1÷CICC)^(2G1RP or F2G1RP)) ÷ (1 - 1÷CICC)
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(4)
Gnet_profit Factor
= 1 + Gnet_profit Ratio
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Ginvested_capital Factor
= 1 + Ginvested_capital Ratio
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ROIC Factor
= 1 + ROIC Ratio
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Clean Invested Capital Cost Factor
= { [ 1 + 10Y Treasury Notes Ratio ] × [ 1 + D/E × (1 + Commercial Loan Prime Ratio + Spread Ratio) ] ÷ [ 1 + D/E ] }
= 1 + CICC Ratio
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CICC
= 100 × CICC Ratio
= 100 × (CICC Factor - 1)