Session 13: From Earnings to Incremental Cash Flows - A Journey

We began the class today by extending the return on capital concept to entire companies and argued that notwithstanding its accounting limitations, comparing the return on capital to the cost of capital provides us with a basis for measuring whether a company’s existing investments are good (or not). If you are interested and want some light reading material for your flight to Jamaica (which is where I am sure you are going for Spring break), try this absolutely scintillating, cannot-be-put-down, amazing (n