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The Unbearable Longevity of the Classic Free Cash Flow (FCF) WACC : A Nontechnical Retrospection

Tham, Joseph - 2019

In this short note, we present a nontechnical retrospection on the unbearable longevity of the classic WACC (Weighted Average Cost of Capital) for the Free Cash Flow (FCF) in perpetuity. Over the past two decades, researchers in finance have increased greatly our understanding of the properties...

Persistent link: https://www.econbiz.de/10012890819

WACC and CAPM According to Utilities Regulators : Confusions, Errors and Inconsistencies

Fernandez, Pablo - 2019

Regulators of many countries try to find the “true” WACC of Electricity, Gas, Water… activities. All their documents have in common a main confusion: they do not differentiate among expected, required, historical, and regulator allowed returns, which are 4 very different concepts. Most of...

Persistent link: https://www.econbiz.de/10012893723

Bonos Singulares : Perpetuos, 'Bella Durmiente,' 'Matusalén,' Basura... (Singular Bonds: Perpetuals, Matusalem, Junk Bonds...)

Fernandez, Pablo - 2018

Spanish Abstract: Se presentan varios bonos interesantes. Algunos por su gran duración: bonos “la bella durmiente” (a 100 años, emitidos por Walt Disney Co. en 1993), bonos Matusalén (a 50 años), bonos perpetuos. Se analizan los bonos a 100 años y se comparan con un bono a 30 años y...

Persistent link: https://www.econbiz.de/10012937957

Estructura Optima de Capital Para Flujos de Caja Finitos (Optimal Capital Structure for Finite Cash Flows)

Mejia-Pelaez, Felipe - 2018

This paper has an English version and can be downloaded from: "http://ssrn.com/abstract=1799605" http://ssrn.com/abstract=1799605En este trabajo se muestra cómo encontrar la estructura óptima de capital y el valor con un endeudamiento constante y variable período a período, cuando la tasa de...

Persistent link: https://www.econbiz.de/10012940457

Valuing Companies by Cash Flow Discounting : Only APV Does Not Require Iteration

Fernandez, Pablo - 2020

The most used methods for valuing companies by Cash Flow Discounting are equity cash flow, free cash flow, capital cash flow and APV (Adjusted Present Value). Only APV does not require iteration All four methods, if properly applied, always give the same value. This result is logical, as all the...

Persistent link: https://www.econbiz.de/10012824556

Cash Flows in Perpetuity with Different Growth Rates for the FCF and the Debt : A Numerical Illustration

Tham, Joseph - 2019

In this note, we present a simple numerical example to illustrate the case where the growth rate for the Free Cash Flow (FCF) gU is greater than but different from the growth rate for the Cash Flow to Debt (CFD) gD. Here we assume that the value of the appropriate discount rate for the tax...

Persistent link: https://www.econbiz.de/10012869300

Two Fundamental Principles for Cash Flow Valuation (CFV)

Tham, Joseph - 2019

In this note, we discuss two fundamental principles for Cash Flow Valuation (CFV). We hope that adherence to these two principles will improve the practice of CFV. These principles are general, relatively uncontroversial, and should be acceptable as starting points for cash flow valuation....

Persistent link: https://www.econbiz.de/10012871063

Optimal Capital Structure (OCS) with a Finite Cash Flow : A Simple Numerical Illustration

Tham, Joseph - 2019

In this note, we present a simple numerical example, with a finite cash flow, to illustrate the concept of the Optimal Capital Structure (OCS). First, we assume that the discount rate for the tax benefits KTB equals the return to unlevered equity KU. The cost of debt KD is a simple linear...

Persistent link: https://www.econbiz.de/10012871362

the Weirdness and Absurdity of a Specific theory on the Present Value of the Tax Benefits (PVTB) from Debt Financing

Tham, Joseph - 2019

. The weirdness or absurdity of a theory does not automatically disqualify a theory; however, perhaps another review of the … implications of the theory may have some merit. It seems that the definition of the present value of the tax benefits (PVTB) was … revised to accommodate pre-existing ideas; perhaps the new theory is masquerading as a sort of reverse engineering …

Persistent link: https://www.econbiz.de/10012872291

Discount Rate (Risk-Free Rate and Market Risk Premium) Used for 41 Countries in 2015 : A Survey

Fernandez, Pablo - 2017

This paper contains the statistics of a survey about the Risk-Free Rate (RF) and of the Market Risk Premium (MRP) used in 2015 for 41 countries. We got answers for 68 countries, but we only report the results for 41 countries with more than 25 answers.The average (RF) used in 2015 was smaller...

Persistent link: https://www.econbiz.de/10012971846