Cuando se proyectan estados financieros hay que tener cuidado de construir un modeloconsistente y correcto. Esto no es una tarea fácil. Incluso el experto en modelaje másexperimentado puede incurrir en equivocaciones. Esto es especialmente relevante cuandose construye un modelo financiero sin...

When calculating Tax Savings, TS, we are confronted with a strange mix of accounting accrual and market value when involving TS in the calculation of the Weighted Average Cost of Capital, WACC, or the Cost of Equity, Ke. Firms earn the right to TS once they accrue the interest expense and they...

This chapter is devoted to the definition and calculation of cash flows, namely, cash flow to debt, (CFD), cash flow to equity, (CFE), Capital Cash Flow, (CCF), tax savings, (TS) and free cash flow, (FCF). The direct and indirect methods are used to derive the relevant cash flow profiles for the...

In a world with taxes, there is a small discrepancy between the deflated WACC WACCDef and the real wacc. This is due to the (1-T) term that is in the standard expression for the WACC applied to the Free Cash Flow (FCF). We compare different approaches for valuing nominal and real cash flows with...

In this work we show a simplified financial planning model. In reality, financial planning models are huge and cumbersome. This is a very simplified model compared with what is found in practice.We present some basic principles for constructing the financial statements needed for valuation. We...

En la práctica financiera y la enseñanza de las finanzas el tratamiento que se le da a algunos de los conceptos más importantes en la evaluación de proyectos y la valoración de empresas en muchos casos es por decir lo menos, ligero. Por un lado está la determinación de los flujos de caja...

Terminal value is critical for valuation purposes because very often it is a large part of what constitutes the value of a firm. In this short note I answer and clarify some typical questions and myths related to the calculation of terminal value. They are related to the use of non growing...

In this teaching note we show that using the findings of Tham and Velez-Pareja 2002, for finite cash flows, Ke and hence WACC depend on the discount rate that is used to value the tax shield, TS and as expected, Ke and WACC are not constant with Kd as the discount rate for the tax shield, even...

In this note we correct the findings reported by Vélez-Pareja and Tham (2005). Although perpetuities are somewhat artificial in the sense that in practice they do not exist, they are relevant because no matter how detailed and complex a forecasted financial plan for a firm or project could be,...

The Constant Growth Model attributed to Gordon (the Gordon Model) is one of the most known and popular models in Corporate Finance. In this work we show that even withadjustments in the calculation of the proper Weighted Average Cost of Capital, WACC, in order to grant that the model with zero...