Return on invested capital first requires us to calculate adjusted NOPAT So that starts off with our target company's EBIT To change that to NOPAT, we take that EBIT and make it post tax So I'm going to times it by one minus (go up to my assumptions near the top) And we've got a tax rate So my target company's NOPAT in year 1 is 11.2 However we then ask, is the NOPAT going to increase at all because of the deal? And yes it will due to post tax synergies We've got those post tax synergies already calculated for us a little further up Great! So my adjusted NOPAT, the sum of those two items gets me 14.7 So that's the return I'm going to earn, I need to calculate the invested capital My invested capital is going to be my acquisition EV, so we go and find that Total acquisition EV is 225 We're then going to ask, is there anything else we need to pay for? And the first of these is the working capital adjustment We're going to assume that between offer date and completion date, the working capital of the company is going to go up And we need to pay a little bit more for that Something else we also need to pay for is the fees. So if I scroll down a little bit in our sources and uses of funds There it is, we also need to pay for that That comes to 236.1 I now want to calculate my return on invested capital I'm going to take the return on year 1, I'll divide that by the beginning invested capital i.e. how much was invested at the start of that year But you could also take the average, the average of the start of the year and the end of the year And that gets me to a figure of 6.2% I now want to compare that to the company's WACC, I look a little bit further up, I can see their WACC is 7% (Oh dear) Unfortunately the 6.2 at the moment isn't covering the company's WACC We might want to revisit some of our assumptions, maybe the post tax synergies are a little bit low See if we can improve that ROIC at all