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Author: andrewychan Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 5655  
Subject: My Report on the Economic Model Date: 8/21/2000 1:03 PM
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Recommendations: 338
Dear Fools,

In the past year, I have contributed to the Motley Fool's message boards by providing financial reviews to widely followed companies (Ariba, Yahoo, Broadcom, Brocade, and Nokia) using ROIC as the cornerstone of my analysis. The feedback from Fools has been very positive and I was pleasantly surprised and encouraged by the desire of the community to learn more. Many Fools have asked me tones of questions about how to calculate ROIC and I have tried to answer them the best way I could. However, I realized that it was very time consuming and hard to provide an adequate answer through message boards. Even providing spreadsheets didn't work out as it brought even more questions. Therefore, I have decided to provide Fools with a 30-page report on the Economic Model to help Fools understand the mechanics behind the numbers.

The Report

The Mechanics of the Economic Model goes straight to the point: how to calculate ROIC, WACC, EVA, and MVA. In the report, I give all details about how to calculate those numbers, including justifications and explanations, which is the key for investors to fully understand and appreciate the model. The report is based on readings from Bennett Stewart (The Quest for Value), Michael Mauboussin (CSFB), Paul Johnson (Robertson Stephens, Columbia University, Gorilla Game) and many other authors. The report also provides links to articles which I believe are must reads for all investors (not only to those who are interested in the Economic Model). Please note that the Economic Model report was originally written for the benefit of the McGill Investment Club (McGill University, Montreal, Canada) and its members.

The report is provided for free because I am not in it for the money. I am in it for the experience and the desire to educate whoever wants to learn. The only thing I ask is that if you download the report, you recommend this post so that I can track how many people are reading my work. It is the kind of feedback that drives and motivates people like me.

If you want to ask questions, feel free to post them on the Boring message board. Any feedback is always welcomed. You can download the report here, a spreadsheet is also provided:

Yahoo! Briefcase Economic Model Folder:
http://briefcase.yahoo.com/bc/andrewychan?c&.flabel=fld36&.src=bc&start=1

I would like to thank all Fools with whom I had very constructive exchanges and for those who provided me with feedback.

Regards,

Andrew Chan
Just an ordinary Fool among others.

About Me

Name: Andrew Chan
TMF Username: andrewychan
e-mail: andrewychan@yahoo.com
Occupation: Undergraduate student, B.Com, Finance Major, Strategic Management Concentration, McGill University.
City, Province, Country: Montreal, Quebec, Canada.
Career Objectives: To work for Motley Fool Canada or as a buy-side analyst.

I am the Co-founder of the McGill Investment Club (www.management.mcgill.ca/mic). The McGill Investment Club (founded in April 1999) has a similar business model as the Motley Fool and has for mission to educate students in matters of Finance and Security Analysis. Several other articles are provided on our site. The McGill Investment Club manages real-money portfolios and provide members with stock reports as well.

My experience in the industry comes from investing my own money (and a few personal clients). I have been investing in the market since April 1997 and have achieved substantial return over that period. In securities analysis, I am totally self-taught with some basic knowledge coming from my B.Com



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