Terminal value is critical for valuation purposes because very often it is a large part of what constitutes the value of a firm. In this short note I answer and clarify some typical questions and myths related to the calculation of terminal value. They are related to the use of non growing...

The English version of this paper can be found at http://ssrn.com/abstract=1557845.This chapter is devoted to the definition and calculation of cash flows, namely, cash flow to debt, (CFD), cash flow to equity, (CFE), Capital Cash Flow, (CCF), tax savings, (TS) and free cash flow, (FCF). The...

Este capítulo se dedica a la definición y el cálculo del valor terminal que es el valor de los flujos de caja que se generan en la firma o proyecto más allá del último período de la proyección. Se consideran situaciones con y sin crecimiento real y con y sin inflación. Se derivan las...

This paper shows that the notion of rate of return is best understood through the lens of the average-internal-rate-of-return (AIRR) model, first introduced in Magni (2010a). It is an NPV-consistent approach based on a coherent definition of rate of return and on the notion of Chisini mean, it...

This paper presents three different approaches for calculating the levered annual values for a finite cash flow profile. In the first approach, we use K_U, the return to unlevered equity to calculate the annual tax savings and use K_U to calculate the (present) value of the tax savings. In the...

Practitioners and teachers in finance usually treat the most important issues in project appraisal and cash flow valuation is at least light. One is the construction of cash flows; in the other hand is the cost of capital that is intrinsically related to the valuation of the cash flows. The...

When creating a firm or when we intend to value an ongoing concern it is very important to have reliable and consistent financial statements in order to make the proper decisions not only for the starting of a new firm but for the following up and monitoring that firm or simply an ongoing...

Many firms have debt financing in a foreign currency. What are the tax implications of the foreign loan for the calculation of the Weighted Average Cost of Capital (WACC)? With a foreign loan, there are two effects. First, there is the standard tax savings from the interests deduction with the...

Many firms have debt financing in a foreign currency. What are the tax implications of the foreign loan for the calculation of the Weighted Average Cost of Capital (WACC)? With a foreign loan, there are two effects. First, there is the standard tax savings from the interest deduction with the...

Debt is rarely risk-free. Yet, on grounds of simplicity, in most discussions on the weighted average cost of capital (WACC), we assume that the debt is risk-free. At the same, in the calculation of the WACC, we may use a value for the cost of debt d that is higher than the risk-free rate rf. In...