In this work we show a simplified financial planning model. In reality, financial planning models are huge and cumbersome. This is a very simplified model compared with what is found in practice.We present some basic principles for constructing the financial statements needed for valuation. We...

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...

In this teaching note the reader finds a simplified financial model. In reality, financial models are huge and cumbersome. What we present is very simplified model in comparison to what is found in practice. We indicate the formulas that have to be utilized in the construction of the financial...

Most popular corporate finance textbooks and practitioners present the WeightedAverage Cost of Capital WACC calculation as independent from the Free Cash Flow.It is a common use that practitioners calculate a WACC a priori and use it independentlyfrom the firm value (this is, from FCF). In this...

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...

Usualmente los textos de finanzas presentan por lo menos un capítulo sobre análisis financiero, entendido como análisis de razones financieras. Se enseñan muchos cursos en análisis financiero y se gasta una enorme cantidad de tiempo en cómo calcular las razones financieras basados en...

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...

Everybody uses tax shields when calculating the Weighted Average Cost of Capital (WACC). The textbook formula includes the tax shield with the (1-T) factor affecting the contribution of debt to the WACC. Tax shields are a strange mix of accounting and accrual related to WACC that relies on...

In this teaching note I list some suggestions that might be useful to take into account when forecasting financial statements departing from historical data. The ideas presented in this note are the result of advising undergraduate and graduate students in the course Econ 195.96/295.96...

Llano-Ferro (2009) proposes a solution to avoid "significant errors" when the Weighted Average Cost of Capital (WACC) "obtained by the standard formula leads to significant errors in Net Present Value of the Firm calculations; particularly in those that apply to perpetual cash flow series. In...