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Risky Tax Shields and Risky Debt : A Monte Carlo Approach
Velez-Pareja, Ignacio - 2010
I identify three sources of risk for the tax shields: two of them associated to the risk of debt and one associated to … the operating risk. I present a set of conditions for defining risky debt associated to cash flow and not to accounting … risk of tax shields is Ku, the unlevered cost of equity …
Persistent link: https://www.econbiz.de/10013141867
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Risky Tax Shields : An Exploratory Study
Velez-Pareja, Ignacio - 2013
This article (1) identifies three sources of risk for tax shields (TS): Two of them are associated with debt risk and … one is associated with operating risk. (2) A set of conditions for defining risky debt associated with cash flow, not with … suggests that it is not reasonable to define the risk of TS as measured by a single discount rate, but rather as a mix of debt …
Persistent link: https://www.econbiz.de/10013094155
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Calculating Betas
Velez-Pareja, Ignacio - 2011
This teaching note shows the relationship between levered and unlevered betas and the general formulation for the cost of equity. It also shows, step by step, the procedure to estimate betas from data found in the stock market.It shows well known procedures for estimating betas: correlation...
Persistent link: https://www.econbiz.de/10013128991
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Analytical Solution for Optimal Capital Structure in Perpetuities
Tham, Joseph - 2011
We derive and present the formula for optimal debt under the assumption that tax shields are discounted at the cost of levered equity, Ke and cash flows are on perpetuity. The formulation is consistent and is derived from basic financial principles. This formulation is valid for non-growing...
Persistent link: https://www.econbiz.de/10013132251
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Company Valuation in an Emerging Economy - Caldonia : A Case Study
Velez-Pareja, Ignacio - 2011
In this article we use a real life case from an emerging country to illustrate the valuation with discounted cash flow methods that include complexities such as unpaid taxes, losses carried forward, foreign exchange debt, presumptive income and inflation adjustments to the Financial Statements....
Persistent link: https://www.econbiz.de/10013132604
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Cost of Capital and Value Without Circularity for Constant Growth Perpetuities
Mejia-Pelaez, Felipe - 2011
This paper presents the derivation of non-circular formulas for the calculation of the cost of equity, WACC, equity value (as a function either of initial debt or leverage), and levered firm value, using some previous results and showing their consistency with other well-known expressions....
Persistent link: https://www.econbiz.de/10013133106
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Cost of Capital with Levered Cost of Equity as the Risk of Tax Shields
Tham, Joseph - 2011
We present the derivation of cost of capital under the assumption of risky tax shields discounted with the cost of levered equity. We show that the formulation is consistent and is derived from basic financial principles. This formulation is valid for finite cash flows and non growing...
Persistent link: https://www.econbiz.de/10013133138
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Cost of Equity and WACC for Perpetuities with Constant Growth
Mejia-Pelaez, Felipe - 2011
This paper presents a formal derivation of general expressions for Ke and WACC in perpetuities with constant growth, which do not make any assumption on what the proper discount rate is to be applied to the firm's tax shield, and are complemented with numerical examples of its application....
Persistent link: https://www.econbiz.de/10013133176
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Analytical Solution to the Circularity Problem When Using Discounted Cash Flow Valuation (Solución Analítica al Problema de la Circularidad Usando Flujos de Caja Descontados) (Span...
Mejia-Pelaez, Felipe - 2011
In this paper we propose an analytical solution to the circularity problem between value and cost of capital. Our solution is derived starting from a central principle of finance that relates value today to value, cash flow, and the discount rate for next period. We derive a general formulation...
Persistent link: https://www.econbiz.de/10013133179
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Timanco S.A : Unpaid Taxes, Losses Carried Forward, Foreign Debt, Presumptive Income and Adjustment for Inflation: Matching DCF and EVA©
Velez-Pareja, Ignacio - 2010
There are methods to match value added approaches (Residual Income Method, RIM and Economic Value Added, EVA) with discounted cash flow methods, DCF. In this note we use a real life case from an emerging country to illustrate the matching, with complexities such as unpaid taxes, losses carried...
Persistent link: https://www.econbiz.de/10013140033