Unlocking sustainable growth with ROIC analysis.
Dr. Anya Sharma, a 35-year-old physician with $280,000 in student loans and a $350,000 AGI, is contemplating expanding her medical practice by adding new equipment and staff, costing $80,000. While she sees the potential for increased revenue, she's unsure if the expansion will generate sufficient return to justify the investment, especially given her existing debt obligations and desire to maximize her retirement savings through backdoor Roth contributions.
By utilizing the ROIC calculator, we can project the return on her $80,000 investment, comparing the expected net operating profit after tax to the capital invested. This allows Dr. Sharma to make an informed decision based on tangible financial metrics, ensuring the expansion strengthens her practice's financial foundation rather than jeopardizing it. By factoring in her existing debt and savings goals, we can determine a suitable ROIC benchmark for her situation.
The ROIC Calculator requires input of the initial investment ($80,000), projected net operating profit after tax, and any additional working capital requirements. The result is a percentage reflecting the efficiency of the investment.
$25,000 increase in annual net profit by ensuring the ROIC exceeds the cost of capital, facilitating debt repayment and investment growth.
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