Mehra and Prescott (1985) argued that, according to sensible asset pricing models, stocks should provide at most a 0.35% premium over bills. However, companies use higher equity premia (average around 6%) for evaluating their investment projects, professors use in class and in their textbooks...

We analyze the results of a recent survey of executives and finance professors. We present the required equity premium used in 2008 by 216 companies and 39 professors and their comments. The range of the 216 companies goes from 2% to 30% (average 6.3%) and the range of the 39 academics goes from...

This paper contains 100 questions that students, alumni and other persons (judges, arbitrageurs, clients') have posed to me over the past years. They were recompiled so as to help the reader remember, clarify and, in some cases, discuss some useful concepts in finance. Most of the questions have...

This document has 100 questions from students, alumnae and other persons (judges, clients,...). They are useful to clarify some useful concepts in finance. Most of the questions have a clear answer. The document also has short answers to all questions

Pablo and his wife have five children. As they like traveling by road with the whole family, often including the grandparents, they decided to buy a German van with nine seats. On October 24, 2005, Pablo took the van to the a dealer to have the spare key repaired. But the spare key was not ready...

During the last 3, 5, 10 and 15 years, the average return of the equity mutual funds in Spain was 600 basis points smaller than the average return of the Spanish Index ITBM. Nevertheless, on December 31, 2006, 348,000 investors in the 120 existing equity mutual funds had 10.7 billion euros. Only...

We compute the Shareholder Value Creation of Banco Popular. The market cap of Banco Popular increased between December 1991 and December 2005 in 14.9 billion euros. The shareholder value creation during this period was 13.4 billion euros. The average shareholder return of Banco Popular in this...

We compute the Shareholder Value Creation of BBVA. The market cap of increased between December 1991 and December 2005 in 61 billion euros. The shareholder value creation during this period was 47.5 billion euros. The average shareholder return of BBVA in this 15 years was 20.1%, higher than...

This paper shows that ten methods on company valuation using cash flow discounting (WACC; equity cash flow; capital cash flow; adjusted present value; residual income; EVA; business's risk-adjusted equity cash flow; business's risk-adjusted free cash flow; risk-free-adjusted equity cash flow; and...

We claim that in a world without leverage cost the relationship between the levered beta (BL) and the unlevered beta (Bu) of a company depends upon the financing strategy. For a company that maintains a fixed book-value leverage ratio, the relationship is Fernandez (2004): BL = Bu + (Bu - Bd) D...