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Thanks for the kind words about the book!

1. How do you expense intangibles (both advertising and R&D) when the depreciation period is below 3 years, or above 3 years. For example, if i expense R&D for a period of 8 years.

Same process as using a 3-year depreciation, except you divide by "8." If you think the intangible has an expected life of two years, then divide by "2."

Damodaran has a useful spreadsheet here: that may help

2. Why is the capitalized operating leases discount rate set at 8%?

Yeah, I should have better explained my reasoning. When I wrote the book the 10-year Treasury was yielding 3.8%-4.3%, so I just rounded to 4.0%, then added a spread premium of 400 basis points. This seemed like a reasonable interest rate that a lessee (the tenant) would pay. In retrospect, a 400 basis point premium seems a little high. So I now use the 10-year Treasury yield and add 300 basis points. Admittedly, this is a broad-brush approach; some companies deserve lower interest rates, some higher. But, I try to keep things simple.

Speaking of the cost of money, did anyone note what the 3-month Treasury is yielding these days? 7 basis points! (That's 0.07%.) Last weekend, the 3-month yielded 1.51%. The sharp and swift decline gives you a clue to the high state of anxiety on Wall Street. (Another clue is the CBOE Volatility Index, or VIX.^vix...) In the fixed income market, when bonds rally (i.e., there are more buyers than sellers), yields decline. I have never seen the yield on the short end of the bond market shed 144 basis points in three trading days.

Anyway, if I didn't answer either or both questions to your satisfaction, please let me know. Also, if you want a copy of a presentation I gave last Spring, send me an e-mail at If for no other reason, I believe you will find my comments on why the stock market is still expensive of interest.

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