Independent learning lab · framework lineage

Goldman Sachs / 高盛：value creation and valuation lab

Use editable example inputs to study ROIC–WACC value creation, a three-factor CROCI decomposition and a simplified FCFF DCF. Results recompute instantly and failed gates remain visible beside the output.

Source document

Equity Valuation: Understanding What's Important

PDF physical pages p2; p4–38; p40–49; p51–63; p64–76

Concordal is an independent educational tool and is not affiliated with, partnered with, sponsored by or endorsed by Goldman Sachs. The name identifies public framework lineage only; this page uses no institutional logo or proprietary model and gives no buy/sell advice.

Program 01 · value-creation gate

ROIC versus cost of capital

Growth does not automatically create value. Incremental capital produces positive economic profit only when return on invested capital exceeds its cost.

ROIC = NOPAT ÷ average invested capital · value spread = ROIC − WACC

Lineage reference: PDF physical pages p31–34

Inputs (same reporting period)

NOPATcurrency units (for example, millions)

Average invested capitalsame currency unit as NOPAT

Weighted average cost of capitalpercent %

ROIC

12.00%

NOPAT ÷ average invested capital

ROIC − WACC spread

3.50%

Example shows a positive value-creation spread

Economic profit

35.00

Spread × average invested capital

Program 02 · cash-return bridge

CROCI three-factor decomposition

This teaching bridge separates cash return into asset turnover, operating margin and cash conversion. Real research still requires inflation, asset-life and accounting adjustments.

CROCI = (revenue ÷ GCI) × (cash operating profit ÷ revenue) × (cash return ÷ cash operating profit)

Lineage reference: PDF physical page p27

Inputs (one currency and reporting period)

Revenuecurrency units

Gross cash investment (GCI)same currency unit as revenue

Cash operating profitcurrency units

Cash returncurrency units

Asset turnover

1.50×

Revenue ÷ GCI

Operating margin

15.00%

Cash operating profit ÷ revenue

Cash conversion

62.22%

Cash return ÷ cash operating profit

Decomposed CROCI

14.00%

Product of the three drivers

Direct CROCI check

14.00%

Cash return ÷ GCI

Reconciliation gap

-0.000000%

Should approach zero; a gap flags input or definition review

Program 03 · simplified valuation exercise

FCFF DCF and the terminal-growth hard gate

The explicit-period FCFF grows at one illustrative rate and then uses a Gordon terminal value. This is a formula tutor, not a company forecast, competitive-advantage fade model, scenario probability or capital-structure study.

EV = Σ FCFFₜ ÷ (1 + WACC)ᵗ + [FCFFₙ × (1 + g) ÷ (WACC − g)] ÷ (1 + WACC)ⁿ

Lineage reference: PDF physical pages p51–63

Inputs (use one scale for money and shares)

Base-year FCFFcurrency units

Explicit-period annual growthpercent %

DCF WACCpercent %

Terminal growth gpercent %

The hard gate requires WACC > g; terminal value is not calculated when WACC is equal to or below g.

Explicit forecast yearsyears (integer 1–30)

Net debtcurrency units; net cash may be negative

Diluted sharesshare units matching the money scale

PASS · formula gates cleared

Explicit-period PV

644.28

Terminal-value PV

2,090.31

Enterprise value

2,734.59

Equity value

2,434.59

Illustrative value per share

24.35

Terminal share of EV

76.44%

Above 75%: the result is highly dependent on distant assumptions; downgrade it and run sensitivities.

How to use this lab correctly

• Normalize reporting period, currency, share scale and accounting definitions before editing inputs; attractive results with incompatible definitions are not comparable.
• Keep ROIC, CROCI and DCF separate; explain conflicts rather than hiding them with an average.
• Page inputs do not fetch company filings and do not constitute a security valuation. Investors should verify primary disclosures and decide independently.

Next: Morgan Stanley base-rate lab