Cash Flow Return On Investment
Cash flow return on investment or CFROI is a valuation model that evaluates a company or business or project on the basis of cash flow. It avoids focus on corporate performance and earnings. The cash flow return on investment is calculated by dividing cash flows by the market value of the type of capital employed. Sometimes it is compared to hurdle rate to determine whether a project is worth pursuing. CFROI must be higher than hurdle rate
The basic formula is given by:
CFROI = Gross Cash Flow / Gross Investment