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Strategies & Market Trends : Professional Equity Analysis - the Pursuit of True Value

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To: Reginald Middleton who wrote (51)	1/31/1997 9:42:00 AM
From: cape radical	of 102

first of all, your portfolio spreadsheet was very impressive. you definitely have the touch for writing comprehensive financial programs. congratulations on an exceptional job. i am glad you posted some sample numbers so that we can get to bottom of some definitions. - i noticed that you counted S&M as an expense in your MSFT FY1996 evaluation. do you ever fudge this number so that a set percentage is investment and the rest expense? - you excluded R&D as an expense, which is what i do. -what do you define as the invested capital? i usually use: IC* (or NA) = Total Assets - Current Liabilities - Retained Income in this case: IC = 10093-2424-2195 =5473 the ROIC = EBITARD(1-T)/IC* = 53% RD is R&D the EVA would then be (assuming a WACC of 13%): EVA = (ROIC-WACC)IC = 2189 are we kosher so far or do you use different definitions? you are doing all Value seekers a great service with this thread. keep up the good work.

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