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...

In the financial appraisal of a project, the cashflow statements are constructed from two points of view: The Total Investment (TI) Point of View and Equity Point of View. One of the most important issues is the estimation of the correct financial discount rates for the two points of view. In...

Unquestionably, before the advent of the personal computer, modeling the impacts of inflation in investment appraisal was an enormous task. Currently, with the widespread availability of personal computers, conducting investment appraisal by constructing financial statements with nominal prices...

Researchers continue to quot;horse racequot; the Residual Income (RI) model and the Cash Flow (CF) model, with no regard for the underlying assumptions. Recently, Lundholm and O'Keefe (2000) asserted that they have identified an important reason for the discrepancy between the results obtained...

Most finance textbooks (See Benninga and Sarig, 1997, Brealey, Myers and Marcus, 1996, Copeland, Koller and Murrin, 1994, Damodaran, 1996, Gallagher and Andrew, 2000, Van Horne, 1998, Weston and Copeland, 1992) present the Weighted Average Cost of Capital WACC calculation as:WACC = d(1-T)D% eE%...

This is an annotated appendix that accompanies the paper. In this note, we provide detailed commentary on a numerical example that illustrates the ideas that we discuss in the main paper. The numerical example is in Table18.10, Chapter 8, page 656, of the third edition of Corporate Finance,...

In this note, we extend a numerical example in the textbook by Berk & DeMarzo that matches methods for only when K_TS is equal to K_D. We show that there is a generalized formulation for the return to levered equity K_E that works for any value of K_TS, the appropriate discount rate for the tax...

This is a draft of Chapter 1 for an upcoming book on Financial Modeling & Valuation. Informally, the chapter introduces the basic concepts in cash flow valuation. It reviews the different types of finite cash flows and discusses the cost of capital with and without taxes in a world with perfect...

In this rejoinder, we note that the complaint against the classic FCF WACC is misplaced because it incorrectly identifies the real source of the problem. The fault for the discrepancies, dear colleagues, lies not in the classic formulation of the FCF WACC. The real reason for the discrepancies...