The reinvestment rate is significant in investment valuation as it represents the rate of return that can be earned on the cash flows generated by the investment. It is used to calculate the future value of cash flows and thus impacts the overall valuation of the investment. A higher reinvestment rate will result in a higher valuation and vice versa.
Need help with which companies or projects to invest in? As a key driver of value in business, ROIC...
Download model