Question

please provide an explanation of wacc and roic and how the relate to each other from a financial analysis as well as financial analysis og walmart and costco WAAV & ROIC

Bloomberg Bloomberg Company Cosaca Viholesale Weighted Average Cost of Capital nuet us Equty ic ghted Average Cost of Captal COST us E Ciat of Cata Weight Cost of Captal Capital Structure Grap Capital Structure Lconomic Value Added Historical Graph o USD

explain attachment provided

Answer 1

Weighted average cost of capital (WACC) : it is the rate that company is expected to pay all of its security holders to finance its asset.

Return on invested capital (ROIC) : returns that company generated via invested capital.

If ROIC is greater than WACC it means invested capital is adding vlaue to the firm and vice versa.

As one can analyze from Bloomberg data that both firm's ROIC is greater than WACC it tells that both firm is adding value through invested capital. Difference for costco is more that means capital invested by costco is generating more value than Walmart.