Valuation

ROIC vs WACC: How to Measure Economic Profit and Capital Allocation

by
ROIC vs WACC comparison showing the spread between return on invested capital and cost of capital

ROIC vs WACC is one of the simplest ways to test whether a company is creating economic value with the capital it uses. ROIC measures the operating return generated on invested capital. WACC estimates the return demanded by the investors and lenders who supply that capital. The difference between the two is the economic spread. … Read more

DCF Model for Beginners: Nvidia Cash Flow, WACC, and Terminal Value

by
DCF model for beginners using Nvidia to explain FCFF, WACC, terminal value, and valuation sensitivity

A DCF model for beginners should start with the cash flow being valued, not with a desired share-price target. Discounted cash flow analysis estimates what a business is worth by projecting future cash flows, discounting them for risk and time, and adding a value for the cash flows expected beyond the explicit forecast period. Nvidia … Read more