Simple valuation question
1. I'm curious about why do we forecast change in inventory using turnover ratio? Basically, we use historical manufacturing cost per quantity and it means we unknowingly assume that manufacturing cost itself is cash out (forget about tax rate). Then, when revenue grows (of course cogs grows), then inventory will grow so additional cash out from change in inventory. This is double counting, leading to conservative value. Are we just considering change in inventory as additional safety stock that happens naturally in case of growing target? What happens when historical change in turnover ratio is substantial, like semiconductor industry?
2. How do you adjust for right of use asset? You project current right of use asset depreciation and you cash out future newly contracted lease expense with cpi, considering it as operating lease (of course it directly cash out at capex, then it must be after tax amount).
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