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Neither price reflects the debt value of leases. I have to admit I am still struggling with a way to include debt in a DCF. Its not really helpful to deduct it from the net income in one lump sum, because it is not really money going out the door in the current year and unavailable to shareholders. And the current years rent is deducted as operating expense so subtracting it again would not be right. Any ideas?

fwiw, I've never included any adjustment for lease obligations because other factors - in this space at least - will completely overwhelm this criteria in an otherwise healthy company (plus making the simple obligation that if you are going to add lease debt then you need to find something to put on the asset side to match it). As Roark has shown us, it is important to note when a company owns its real estate (esp. if they otherwise leverage themselves to the hilt ala AZO) and if you are investing in shaky potential turnarounds this is an area you ought to study exhaustively, but otherwise you could be going for way too much precision in a business that if you just look at the Value Line sheet -net margins of 1.8% in 1996, 10.9% in 1999, 4.9% in 2000, 11.9% in 2004 - has fashion written all over it, making a DCF model possibily particularly inappropriate in this space...

at least, that's my opinion.
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