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Suppose that you are hired as a consultant by Quantum Inc. to help them increase their...

Suppose that you are hired as a consultant by Quantum Inc. to help them increase their value. The company has expected growth rate of 8%, ROIC of 8%, and cost of capital of 9%. What would you suggest Quantum Inc. do?

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IF ROIC of Quantum Inc is less than cost of capital then value of the firm will be less.ROIC of 8% is less than 9% cost of capital. The consultant should suggest to choose projects whose ROIC is greater than cost of capital. Else, by changing the capital structure or using retained earnings the cost of capital can be reduced. If Costs of capital is less than ROIC then it would gain value.

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