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Free cash flow yields above ... capital

Discussion in 'Other Off Topic Forum' started by ndnguyen, Nov 21, 2006.

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  1. ndnguyen

    ndnguyen Karting

    Jul 27, 2005
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    #1 ndnguyen, Nov 21, 2006
    "...companies with free cash flow
    yields above the weighted average cost of capital..."

    Does anyone want to explain the above phrase to me? Does it mean roughly: A company with lots of cash which if invested returns more than the cost of borrowing? Many thanks.

    - Nguyen
     
  2. DrStranglove

    DrStranglove FChat Assassin
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    Oct 31, 2003
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    #2 DrStranglove, Nov 21, 2006
    Where did you find it??
     
  3. djui5

    djui5 F1 Veteran

    Aug 9, 2006
    5,418
    Phoenix, Arizona
    #3 djui5, Nov 22, 2006
    It's talking about companies that take in a profit after paying the bills, essentially.
     
  4. ylshih

    ylshih Shogun Assassin
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    Mar 21, 2004
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    #4 ylshih, Nov 22, 2006
    More than that. The phrase is referring to companies that generate cash at rates on capital that are in excess of the rates that they pay for capital. For example, if they can borrow capital at 10% but generate cash (a broader concept than profit) at 15%.
     

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