deletions | additions       diff --git a/section_Building_a_Profitability_Valuation__.tex b/section_Building_a_Profitability_Valuation__.tex  index 3bd6abf..1e1425d 100644  --- a/section_Building_a_Profitability_Valuation__.tex  +++ b/section_Building_a_Profitability_Valuation__.tex 
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Our equation linking $\frac{EV}{IC}$ with the $ROIC$ and the $WACC$ is completely in line with valuation models and concepts such as EVA. The idea is the same : value is created when a business is able to earn more than its cost of capital ($ROIC > WACC$); in this situation, the market value of a business warrants a premium relative to its book value ($\frac{EV}{IC}$ >1). \\  Just as we did for the $DDM$, the $DC$F can be transformed and simplified in order to take into account growth dynamics in a very simplified manner. For example, a $DCF$ version of the Gordon Growth Model ($GMM$) would look like :  \begin{equation}  EV_{t}=\frac{FCF_{t+1}}{R-g} EV_{t}=\frac{FCF_{t+1}}{WACC-g}  \end{equation}  Using the clean surplus accounting rule and replacing $\rho ROIC_{t+1}$ (where $\rho$ is the proportion of NOPAT converted into Free Cash Flows) by $ROIC_{t+1}-g$ where $g$ is the perpetual growth rate in Free Cash Flows, we get :  \begin{equation}  \frac{EV_{t}}{IC_{t}}=\frac{ROIC_{t+1}-g}{R-g} \frac{EV_{t}}{IC_{t}}=\frac{ROIC_{t+1}-g}{WACC-g}  \end{equation}