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141 is said to be on an invested capital basis. In other words, using a net cash flow to invested capital model removes the impact of how
the subject was capitalized (i.e., the subject’s debt/equity structure. Formulaically, all debt‐related costs incurred are added back to the net cash flow to equity figure to determine the amount of cash available to both equity investors and debt participants (i.e., the capital providers to the subject. In order to determine the equity value of the subject when using the net cash
flow to invested capital model, the fair market value (or other appropriate standard of value) of the debt (all forms including preferred stock and traditional lending structures) must be subtracted from the total enterprise value (equity and debt) calculated to arrive at the equity value of the subject.
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