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Valuation multiples are financial measurement tools used to evaluate a company's value by comparing it to other similar companies in the market. They are often used in investment decisions to determine whether a company is overvalued or undervalued. This can impact investment decisions by providing investors with a benchmark for what a company should be worth, which can guide their decisions on whether to invest, hold, or sell.
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Do you need to weigh up several investment projects or public companies to invest in? This spreadsheet compares the efficiency of capital use between companies based on assumptions of Return on Invested Capital (ROIC), reinvestment rate and valuation multiples. Then, net income and equity value forecasts are derived and returns are compared over the long term by the company. The sensitivity of returns to the core assumptions is also provided.
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Need help with which companies or projects to invest in? As a key driver of value in business, ROIC measures how well the company deploys its capital....