When I work out the growth rate of EBIT using Reinvestment rate * ROC, should I used the same rate of growth for all other aspects of the fcff equation. For example,

Reinvestment Rate (60%) * ROC (16%) = Expected growth in EBIT 9.6% so;

Year 1 Year 2
EBIT $9,221 9.6% 11,195
EBIT(1-t) $6,639 9.6% 7276
- Reinvestment $3,983 9.6% 4,366
= FCFF $2,656 9.6% 2,911

Question

When I work out the growth rate of EBIT using Reinvestment rate * ROC, should I used the same rate of growth for all other aspects of the fcff equation. For example,

Reinvestment Rate (60%) * ROC (16%) = Expected growth in EBIT 9.6% so;

                                 Year 1                  Year 2
EBIT                         $9,221     9.6%      11,195
EBIT(1-t)                   $6,639     9.6%       7276
- Reinvestment          $3,983      9.6%      4,366
= FCFF                     $2,656     9.6%       2,911

anonymous · Answer

growth rate is equal to  (retained earnings rate * roc) .. what do u mean by reinvestment here ? is t the capital expenditure that u mean ?