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Published by: Harvard Business Publishing
Originally published in: 2000
Version: 17 July 2002

Abstract

The purpose of this series of notes is to define the key "drivers" of the fundamental value of equity and to illustrate how these drivers determine the future cash flows and the "present value pattern" of the underlying common stock. The series includes one technical note for each term defined. The terms defined are as follows: invested capital (IC), capital expenditures (Capex), earnings, return on invested capital (ROIC), free cash flow (FCF), short- and long-term growth rate and the growth horizon, and advantage horizon. This is a short introductory note to the series.

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Abstract

The purpose of this series of notes is to define the key "drivers" of the fundamental value of equity and to illustrate how these drivers determine the future cash flows and the "present value pattern" of the underlying common stock. The series includes one technical note for each term defined. The terms defined are as follows: invested capital (IC), capital expenditures (Capex), earnings, return on invested capital (ROIC), free cash flow (FCF), short- and long-term growth rate and the growth horizon, and advantage horizon. This is a short introductory note to the series.

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