This article explores the behavior of the stock market in Colombia with the information given by the Bolsa de Bogota Index (Indice de la Bolsa de Bogota, IBB). The index is analyzed from January, 1930 to December, 1998. The inflation rate covers the same period; the inflation rate as measured by...

En Vélez-Pareja y Tham (2001), presentamos diferentes maneras de valorar los flujos de caja. Primero se utilizó el costo promedio ponderado de capital (CPPC) (Weighted Average Cost of Capital, WACC) para descontar el flujo de caja libre (FCL). Segundo, se descontó el FCL con el WACC ajustado....

In these slides we discuss the practical and conceptual difficulty of finding an Optimal Capital Structure. We propose a normative approach we call Implicit Bankruptcy Costs Theory and how to proceed to find the optimal capital structure and value with period-to-period constant and variable...

Practitioners and some academics use potential dividends rather than actual payments toshareholders for valuing a firm´s equity. We underline the differences between the two methods and present some arguments supporting the thesis that firm valuation with potential dividends overstate the...

Vélez-Pareja and Tham, 2003a, Vélez-Pareja and Tham, 2003b and Tham and Vélez-Pareja, 2004 showed the matching between discounted cash flow (DCF) methods and value added methods. They departed from the net operating profit less adjusted taxes NOPLAT and net income when using market values to...

En Vélez-Pareja y Tham (2003), se presentó la forma de hacer coincidir los métodos de valor agregado (utilidad económica (UE) (Residual Income Method, RIM) y el valor económico agregado (VEA) (Economic Value Added, EVA)) y los métodos de flujo de caja descontado (discounted cash flow,...

Practitioners and academics in valuation include changes in liquid assets (potential dividends) in the cash flows. This widespread and wrong practice is inconsistent with basic finance theory. We present economic, theoretical, and empirical arguments to support the thesis. Economic arguments...

Practitioners and teachers very easily break some consistency rules when doing or teaching valuation of assets. In this short and simple note we present a practical guide to call the attention upon the most frequent broken consistency rules. They have to do firstly with the consistency in the...

This paper shows how to proceed to find the optimal capital structure and value with period-to-period constant and variable leverage, when the discount rate for tax shields is Ke, the cost of levered equity. Numerical procedures and recursive closed-form non-circular expressions for the...