A nuestros estudiantes de Finanzas les enseñan que lo más importante en ese área es saber calcular y utilizar la tasa de interés efectiva o capitalizada. Para algunos de nuestros profesores, eso es todo; si un estudiante llega sin saber esa ficción, no sabe Finanzas. Más aun, una gran...

In cash flow valuation, on grounds of simplicity, it is common to assume that the leverage is constant over time. With constant leverage, the return to levered equity is constant and consequently, the Weighted Average Cost of Capital (WACC) applied to the Free Cash Flow is constant. However,...

The value of debt tax shields in foundational corporate valuation models by Nobel Laureates Modigliani and Miller (MM) continues to be a controversial issue that is central to our understanding of corporate finance. This paper argues that a fundamental valuation problem exists in the MM tax...

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...

This paper introduces a new method of investment performance analysis, based on the recent approach of Average Internal Rate of Return (AIRR). We show that the approach generates rates of return suitable for assessing both a fund´s (portfolio´s) performance and a manager´s performance. The...

This paper shows that the Internal-Rate-of-Return (IRR) approach is unreliable, and that the recently introduced Average-Internal-Rate-of-Return (AIRR) model constitutes the basis for an alternative theoretical paradigm of rate of return. To this end, we divide the paper into two parts: a pars...

This paper presents a formulation for the cost of equity, the WACC, and the value of equity and firm for growing perpetuities without circularity, using some previous results. We also derive a relationship between leverage, D%, and growth, given a value of debt at instant zero.