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,...

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...

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...