It is a well known problem the interactions between the market value of cash flows and the discount rate (usually the weighted average cost of capital, WACC) to calculate that value. This is mentioned in almost all textbooks in corporate finance. However, the solution adopted by most authors is...

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...

Este es material de curso del libro Decisiones Empresariales bajo Riesgo e Incertidumbre. El nivel del libro es basico. Se usan muy pocas matematicas y puede ser usado por gerentes. En este sexto capitulo se presenta la idea del analisis de sensibilidad. Se ilustran las diferentes formas de...

Este es material de curso del libro Decisiones Empresariales bajo Riesgo e Incertidumbre. El nivel del libro es basico. Se usan muy pocas matematicas y puede ser usado por gerentes. En este octavo capitulo se analiza el problema de las decisiones secuenciales. En particular se usa la...

Este es material de curso para un curso introductorio a la Probabilidad y la Estadistica en Ingenieria y Administracion. Es parte de algunas notas de clases de mis cursos en Español sobre esos temas. Cuando se toman decisiones y existen eventos futuros y desconocidos la unica razon por la cual...

Abstract: In this note, we show that with respect to the Miles and Ezzell (M&E) Weighted Average Cost of Capital (WACC), the return to levered equity for finite cash flows is constant if the debt-equity ratio is constant. We assume that the reader is familiar with the M&E WACC. The expression...

In this teaching note we show how to use sensitivity analysis to consider uncertainty in the valuation of cash flows. We illustrate in a very simple way the use of the traditional identical percent change in the variables and an approximate approach that considers the probability of occurrence...

Se muestran detalladamente las diferentes herramientas (formulas y funciones de hoja de calculo) para el manejo de la conversion de sumas de dinero en diferentes periodos de tiempo.

In this teaching note I make a short review of the major statistics regarding the non traded firms in the U.S. and in Colombia as an example of an emerging market. I show some alternatives to estimate the cost of equity capital when there is not enough trading information. Some of them use the...

When forecasting financial statements care has to be taken to construct a consistentand correct model. This is not an easy task. Even the most experienced expert in modelingmakes mistakes. This is especially relevant when we construct a financial model withoutplugs and without circularity. In...