This paper examines the evolution of the corporate profit base and the relationship between book income and tax income for U.S. corporations over last two decades. The paper demonstrates that this relationship has broken down over the 1990s and has broken down in a manner that is consistent with...

In the absence of owners, how effective are the constraints imposed by the state in promoting effective firm governance? This paper develops state-level indices of the legal and reporting rules facing not-for-profits and examines the effects of these rules on not-for-profit behavior. Stronger...

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...

A large percentage of companies use the discounted cash flow (DCF) approach as the primary technique of investment/project evaluation and capital budgeting process. This approach requires forecasting detailed cash flow of the project under evaluation and then discounting the resulting cash flow...

Debt financing with subsidizes interest rate has a multidimensional impact on the firm. Value of the levered equity, value of the debt and overall firm value will be different of those values with debt financing at market rate. Subsidized interest rate on debt does not create any additional cash...

Debt financing with subsidizes interest rate has a multidimensional impact on the firm. Value of the levered equity, value of the debt and overall firm value will be different of those values with debt financing at market rate. Subsidized interest rate on debt does not create any additional cash...

Frequently analysts and teachers use the capitalized rate of interest for the cost of debt when forecasting and discounting cash flows. On the other hand, some authors (and analysts) estimate the interest payments when forecasting annual financial statements or cash flows based on the average of...

This chapter is devoted to the definition and application of the cost of capital"concept to the valuation of cash flows from different points of view. We present an approach to estimate the cost of debt and general formulations for the cost of equity and the traditional weighted average cost of...

It is a well known problem the interactions between the market value of cash flows and the discount rate (usually the weighted average cost of capital, WACC) to calculate that value. This is mentioned in almost all textbooks in corporate finance. However, the solution adopted by most authors is...

In the Weighted Average Cost of Capital (WACC) applied to the free cash flow (FCF), we assume that the cost of debt is the market, unsubsidized rate. With debt at the market rate and perfect capital markets, debt only creates value in the presence of taxes through the tax shield. In some cases,...