Comparing returns over the long term means analyzing the efficiency of capital use between different investment projects or companies over an extended period. This involves making assumptions about Return on Invested Capital (ROIC), reinvestment rate, and valuation multiples, and then deriving net income and equity value forecasts. The returns of the different companies are then compared to see which one provides the best return on investment over the long term. The sensitivity of these returns to the core assumptions is also analyzed.
Need help with which companies or projects to invest in? As a key driver of value in business, ROIC...
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