340 CFROI Valuation: a total system approach to valuing the firm
ii
HOLT’s DualGrade
performance scorecard, United States, December 1997 341
342 CFROI Valuation: a total system approach to valuing the firm
APPENDIX D
Estimating
retirements
Recall from Appendix B the gross plant identity (using current dollars):
BEG PLANT C CAPX RETIREMENT D END PLANT
Under the assumption of a constant, real historic growth rate (g), then
RETIREMENT D CAPX/[1 C g]
L
where L is gross plant life. Appendix B contains the following express-
ion for CAPX in terms of END PLANT (note that g needs to be
non-zero):
CAPX D
END PLANT
1
1
1 C g
1
1
1 C g
L
Substituting for CAPX in the RETIREMENT expression gives
RETIREMENT D
END PLANT
1
1
1 C g
[1 C g]
L
1
1
1 C g
L
RETIREMENT D
END PLANT
1 C g 1
1 C g
[1 C g]
L
[1 C g]
L
[1 C g]
L
RETIREMENT D
END PLANT (g)
[1 C g][1 C g
L
1]
When dealing not just with gross plant but also total gross operating
assets, released non-depreciating assets are treated as retirements.

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