In this work we explain the proper use of perpetuities and the value of them. We consider two cases: calculating the value on period zero when the perpetuity starAI with a given cash flow in period 1 and when it starAI from a cash flow in period zero and it grows in period 1 at a given rate (as...

In this work we explain the proper use of perpetuities and the value of them. We consider two cases: calculating the value on period zero when the perpetuity starts with a given cash flow in period 1 and when it starts from a cash flow in period zero and it grows in period 1 at a given rate (as...

In this teaching note the reader finds a simplified financial model. In reality, financial 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. The...

The Constant Growth Model attributed to Gordon (the Gordon Model) is one of the most known and popular models in Corporate Finance. In this work we show that even with adjustments in the calculation of the proper Weighted Average Cost of Capital, WACC, in order to grant that the model with zero...

In this teaching note the reader finds a simplified financial model. In reality, financial 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. The...

Usually financial textbooks present the financial ratio analysis. Many courses are taught in financial analysis and teachers spend lot of efforts teaching how to calculate financial ratios. Most of them are used to analyze historical financial statements. These analyses are very useful in...

In theory, different valuation methods, with consistent assumptions, must give identical results. Numerical examples that purport to illustrate the theory should demonstrate the identical results. Unfortunately, in popular textbooks it is all too easy to find numerical examples that are at odds...

In this teaching note, we discuss the basic principles for tariff setting. Tariff setting is very important for regulated industries, such as water and power. The tariff should provide an appropriate risk-adjusted return to the investor. If the tariff were too low, then the investors would not...

This is a course material from the book Managerial Decision Making Under Risk and Uncertainty. The book is originally in Spanish and is untitled as Decisiones empresariales bajo riesgo e incertidumbre. The level of the book is basic. We use very few mathematics and it is expected to be used by...