When estimating future or pro forma financial statements and free cash flows we need to estimate future prices. In doing this we must estimate nominal increases in prices of many items, for instance selling prices, inputs prices (raw material, labor, overhead, etc.), cost of future debt, and...

In this paper we find restrictions for the value of a parameter used in defining the cost of capital for perpetuities and terminal values: the growth rate for the free cash flow. When defining the growth rate for the free cash flow the usual warning is to set it below the growth of the economy...

Although perpetuities are somewhat artificial in the sense that in practice they do not exist, they are relevant because no matter how detailed and complex a forecasted financial plan for a firm or project could be terminal value usually is calculated as perpetuity. This terminal value might be...

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 capitulo cuatro se estudian algunos problemas especiales que se encuentran al usar los metodos estudiados...

Using no-arbitrage arguments in an M & M world, we show that in the N-period case, the appropriate discount rate for the tax shield is rho, the return to unlevered equity. We make no assumption about the appropriate discount rate for the tax shield. Instead, the appropriate discount rate for the...

In this note we show with a simple example the proper way to use the adjusted WACC , the Cash Flow to Equity and the Capital Cash Flow, CCF to calculate the levered value of a firm when it has debt in foreign currency (FC). In this note we assume we are valuating the firm in the context of 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...

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...

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 tercer capitulo se trata la idea de la incertidumbre. Se ilustran los diferentes enfoques de teoria de...

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...