There exists circularity between WACC and value? Another solution.

Although we know there exists a simple approach to solve the circularity between value and the discount rate, known as the Adjusted Present Value proposed by Myers, 1974, it seems that practitioners still rely on the traditional Weighted Average Cost of Capital, WACC approach of weighting the cost o...

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Detalles Bibliográficos
Autores principales: Vélez Pareja, Ignacio, Benavides Franco, Julián
Formato: article Artículo
Lenguaje:Español
Publicado: Universidad Icesi 2006
Materias:
FIRM VALUATION
COST OF CAPITAL
CASH FLOW
FREE CASH FLOW
CAPITAL CASH FLOW
WACC
CIRCULARITY
Facultad De Ciencias Administrativas y Económicas
Estudios Gerenciales
Producción intelectual registrada - Universidad Icesi
Acceso en línea:http://hdl.handle.net/10906/803
http://www.icesi.edu.co/revistas/index.php/estudios_gerenciales/article/view/182
http://biblioteca2.icesi.edu.co/cgi-olib/?infile=details.glu&loid=161095
http://biblioteca.clacso.edu.ar/gsdl/cgi-bin/library.cgi?a=d&c=co/co-008&d=10906803oai
Aporte de:
Red de Bibliotecas Virtuales de Ciencias Sociales (CLACSO) de Consejo Latinoamericano de Ciencias Sociales
id I16-R122-10906803oai
record_format dspace
institution Consejo Latinoamericano de Ciencias Sociales
institution_str I-16
repository_str R-122
collection Red de Bibliotecas Virtuales de Ciencias Sociales (CLACSO)
language Español
topic FIRM VALUATION
COST OF CAPITAL
CASH FLOW
FREE CASH FLOW
CAPITAL CASH FLOW
WACC
CIRCULARITY
Facultad De Ciencias Administrativas y Económicas
Estudios Gerenciales
Producción intelectual registrada - Universidad Icesi
spellingShingle FIRM VALUATION
COST OF CAPITAL
CASH FLOW
FREE CASH FLOW
CAPITAL CASH FLOW
WACC
CIRCULARITY
Facultad De Ciencias Administrativas y Económicas
Estudios Gerenciales
Producción intelectual registrada - Universidad Icesi
Vélez Pareja, Ignacio
Benavides Franco, Julián
There exists circularity between WACC and value? Another solution.
topic_facet FIRM VALUATION
COST OF CAPITAL
CASH FLOW
FREE CASH FLOW
CAPITAL CASH FLOW
WACC
CIRCULARITY
Facultad De Ciencias Administrativas y Económicas
Estudios Gerenciales
Producción intelectual registrada - Universidad Icesi
description Although we know there exists a simple approach to solve the circularity between value and the discount rate, known as the Adjusted Present Value proposed by Myers, 1974, it seems that practitioners still rely on the traditional Weighted Average Cost of Capital, WACC approach of weighting the cost of debt, Kd and the cost of equity, Ke and discounting the Free Cash Flow, FCF. We show how to solve circularity when calculating value with the free cash flow, FCF and the WACC. As a result of the solution we arrive at a known solution when we assume the discount rate of the tax equity: the capital cash flow, CCF discounted at Ku. When assuming Kd as the discount rate for the tax savings, we find an expression for calculating value that does not implies circularity. We do this for a single period and for N periods.
format article
Artículo
article
Artículo
author Vélez Pareja, Ignacio
Benavides Franco, Julián
author_facet Vélez Pareja, Ignacio
Benavides Franco, Julián
author_sort Vélez Pareja, Ignacio
title There exists circularity between WACC and value? Another solution.
title_short There exists circularity between WACC and value? Another solution.
title_full There exists circularity between WACC and value? Another solution.
title_fullStr There exists circularity between WACC and value? Another solution.
title_full_unstemmed There exists circularity between WACC and value? Another solution.
title_sort there exists circularity between wacc and value? another solution.
publisher Universidad Icesi
publishDate 2006
url http://hdl.handle.net/10906/803
http://www.icesi.edu.co/revistas/index.php/estudios_gerenciales/article/view/182
http://biblioteca2.icesi.edu.co/cgi-olib/?infile=details.glu&loid=161095
http://biblioteca.clacso.edu.ar/gsdl/cgi-bin/library.cgi?a=d&c=co/co-008&d=10906803oai
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AT velezparejaignacio existecircularidadentrewaacyelvalorotrasolucion
AT benavidesfrancojulian existecircularidadentrewaacyelvalorotrasolucion
bdutipo_str Repositorios
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