1.Sarah Stanos, an analyst for a large U.S. investment bank, has been assigned to measure company performance and value added for numerous firms in the glass industry.

Using the CFROI information contained in the table, which of the following firms added value in year 2000?

A)   Firm G.

B)   Firm F.

C)   Firm H.

D)   None of the firms added value.

2.Which statement about the relationship between the Economic Value Added (EVA) spread and the spread between the Weighted Average Cost of Capital (WACC) and Cash Flow Return on Investment (CFROI) is least accurate?

A)   WACC – CFROI will be positive when the EVA spread is positive.

B)   Both spreads measure the creation of value.

C)   Both spreads are based on the WACC.

D)   Both spreads measure the creation of economic profit.

3.For a firm where CFROI – WACC is greater than zero, which statement is the most accurate?

A)   Economic profit is negative.

B)   The price-to-book (P/B) ratio is less than one.

C)   Free cash flow to equity (FCFE) is positive.

D)   EVA spread is positive.

答案和详解如下：

1.Sarah Stanos, an analyst for a large U.S. investment bank, has been assigned to measure company performance and value added for numerous firms in the glass industry.

Cash Flow Return on Investment (CFROI) Comparison in year 2000
	Firm F	Firm G	Firm H
Cash Flow Return on Investment (CFROI)	11.8%	13.7%	14.0%
Weighted Average Cost of Capital (WACC)	12.0%	13.0%	14.0%

Using the CFROI information contained in the table, which of the following firms added value in year 2000?

A)   Firm G.

B)   Firm F.

C)   Firm H.

D)   None of the firms added value.

The correct answer was A)    

The CFROI is compared to the firm's cost of capital to determine over- or underperformance. If the CFROI exceeds the cost of capital, then value was added. Firm G is the only firm that had a CFROI greater than WACC.

2.Which statement about the relationship between the Economic Value Added (EVA) spread and the spread between the Weighted Average Cost of Capital (WACC) and Cash Flow Return on Investment (CFROI) is least accurate?

A)   WACC – CFROI will be positive when the EVA spread is positive.

B)   Both spreads measure the creation of value.

C)   Both spreads are based on the WACC.

D)   Both spreads measure the creation of economic profit.

The correct answer was A)

CFROI – WACC will be positive when the EVA spread is positive. Both spreads measure creation of economic profit and value and use the WACC.

3.For a firm where CFROI – WACC is greater than zero, which statement is the most accurate?

A)   Economic profit is negative.

B)   The price-to-book (P/B) ratio is less than one.

C)   Free cash flow to equity (FCFE) is positive.

D)   EVA spread is positive.

The correct answer was D)

When CFROI – WACC is positive, the EVA spread is also positive since they are interpreted in the same manner. Economic profit would therefore be positive, not negative. The P/B ratio would probably be greater than one and FCFE is indeterminate.