Calculator Input
Example Data Table
| Scenario | RONIC | Reinvestment Rate | Discount Rate | Growth Rate | Terminal FCF | Terminal Value | PV of Terminal Value |
|---|---|---|---|---|---|---|---|
| Base Case | 20.00% | 15.00% | 10.00% | 3.00% | USD 157,590.00 | USD 2,251,285.71 | USD 1,397,871.30 |
| Conservative | 13.85% | 18.06% | 11.00% | 2.50% | USD 138,588.54 | USD 1,630,453.43 | USD 967,594.75 |
| Optimistic | 23.44% | 17.07% | 9.00% | 4.00% | USD 168,188.80 | USD 3,363,776.00 | USD 2,186,223.60 |
Formula Used
RONIC = (Terminal-Year NOPAT − Current NOPAT) ÷ (Terminal-Year Invested Capital − Current Invested Capital)
Reinvestment Rate = Terminal Growth Rate ÷ RONIC
Next-Year NOPAT = Terminal-Year NOPAT × (1 + Growth Rate)
Terminal FCF = Next-Year NOPAT × (1 − Growth Rate ÷ RONIC)
Terminal Value = Terminal FCF ÷ (Discount Rate − Growth Rate)
PV of Terminal Value = Terminal Value ÷ (1 + Discount Rate)n
This layout helps compare return on new capital, reinvestment pressure, and how sensitive continuing value is to discount and growth assumptions.
How to Use This Calculator
- Enter current NOPAT and terminal-year NOPAT.
- Enter current and terminal-year invested capital.
- Add the discount rate and terminal growth rate.
- Set the number of years used for discounting.
- Click calculate to display RONIC, reinvestment, terminal FCF, terminal value, and present value.
- Use the CSV or PDF buttons to save the output.
- Review the graph to test how growth shifts terminal value.
FAQs
1. What does RONIC measure?
RONIC measures the return earned on newly invested capital. It compares incremental operating profit with incremental invested capital. Higher RONIC usually signals better capital deployment.
2. Why is terminal value important?
Terminal value estimates the worth of cash flows beyond the explicit forecast period. In many valuation models, it contributes a large share of total value.
3. Why must growth stay below the discount rate?
The perpetuity-style terminal value formula breaks when growth reaches or exceeds the discount rate. That would create an unrealistic or undefined continuing value.
4. What happens if RONIC is low?
A lower RONIC means each new unit of capital produces less profit. That raises reinvestment needs and can reduce terminal free cash flow and total value.
5. What does the reinvestment rate show?
The reinvestment rate shows how much of next-year operating profit must be reinvested to support the assumed terminal growth rate. It links growth to capital efficiency.
6. Why is present value lower than terminal value?
Present value discounts future terminal value back to today. The longer the horizon or the higher the discount rate, the smaller the present value becomes.
7. Can I use any currency or unit label?
Yes. The calculator treats monetary inputs consistently. You can use USD, EUR, PKR, or another label, as long as all amounts use the same unit.
8. Why might the calculator show a warning?
Warnings appear when assumptions look stretched, such as reinvestment above 100% of next-year NOPAT or negative terminal free cash flow. They suggest reviewing the inputs.