A model for making foreign direct investment decisions using real variables for political and economic risk analysis

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Accounting and Finance


The purpose of this paper is to provide a case example to teach students how to estimate a company's sustainable growth by using an extension of the DuPont System of financial analysis on Coca-Cola Corporation. The DuPont system is based on a company's return on equity that is decomposed into three components: net profit margin, total asset turnover, and the equity multiplier. The extended DuPont system of financial analysis multiplies return on equity by the earnings retention rate to calculate sustainable growth. Sustainable growth is the highest level of growth in sales that a company can achieve using internally generated funds only. [PUBLICATION ABSTRACT]