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Strategies & Market Trends : Value Investing

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To: Michael Burry who wrote (7077)	5/7/1999 1:47:00 PM
From: James Clarke	Read Replies (1) of 78462

Why would you add the present value of a lease to invested capital? If you do this, remember to add back rent expense to the numerator, otherwise you're charging them twice for the same thing. Just as if you are going to add debt to the denomiator (invested capital) you must add back interest to the numerator. Do you still get the same conclusion? ROIC = (Net Income + Interest tax effected)/(debt + equity - cash) Mike's Retail ROIC = NI + Interest + Rent/(debt + equity + PV of lease payments - cash)

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