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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...
Persistent link: https://www.econbiz.de/10010763013
In cash flow valuation, on grounds of simplicity, it is common to assume that the leverage is constant over time. With constant leverage, the return to levered equity is constant and consequently, the Weighted Average Cost of Capital (WACC) applied to the Free Cash Flow is constant. However,...
Persistent link: https://www.econbiz.de/10010762922
Vélez-Pareja and Tham, 2003a, Vélez-Pareja and Tham, 2003b and Tham and Vélez-Pareja, 2004 showed the matching between discounted cash flow (DCF) methods and value added methods. They departed from the net operating profit less adjusted taxes NOPLAT and net income when using market values to...
Persistent link: https://www.econbiz.de/10010762967
For cash flows in perpetuity without growth, analysts typically use the following formula for the return to levered equity Ke. Ke = Ku + (Ku – Kd)(1 – T)D/E (1) where Ku is the return to unlevered equity, Kd is the cost of debt, T is the tax rate, D is the market value of debt and E is...
Persistent link: https://www.econbiz.de/10010762988
Este capítulo está dedicado a la definición y aplicación del concepto del 'costo de capital' y la valoración de los flujos de caja desde diferentes puntos de vista. Se presenta un método para estimar el costo de la deuda y las formulaciones generales del costo del patrimonio y del...
Persistent link: https://www.econbiz.de/10010763012
In “Consistency in Chocolate: A Fresh Look at Copeland’s Hershey Foods & Co Case” we showed the inconsistencies regarding the assumption of constant leverage and the inconsistency in the values for equity calculated with different approaches. In this second part we show the differences in...
Persistent link: https://www.econbiz.de/10010763016