This paper proposes a new discounted cash flows' valuation setup, and derives a general expression for the tax shields' discount rate. This setup applies to any debt policy and any cash flow pattern. It only requires the equality at any time between the assets side and the liabilities side of...

This dissertation suggests that the tax savings, in firm valuation, are discounted at a rate computed through a model presented in the literature review, which is different from the rates usually used for this purpose either by the top text books from, for example, Neves (2002), Ross,...

To value shares there are two usual methods that, if properly applied, provide the same value: 1/ Present value of expected free cash flows (FCF) discounted with the WACC rate and then, subtract the value of debt; and 2/ Present value of expected equity cash flows (ECF) discounted with the Ke...

We derive discount rates for depreciation and amortization tax shields resulting from asset step-ups in corporate mergers and acquisitions. By assigning all relevant sources of uncertainty for such kind of tax shields and by accounting for corporate debt it is shown that for APV valuations r*, a...

There are various valuation methodologies applicable to both the financial evaluation of projects as to the valuation of companies. First, have developed methods of Discounted Cash Flows (DCF), which allow discounting, or bring to present value, a series of projected future cash flows over time....

We outline analytically that when testing different implied cost of capital (ICC) measures for validation by employing the Vuolteenaho (2002) framework, the cash-flow news in the validation framework should be defined in a way that considers the model specific assumed sequence of future cash...

The aim of the article is to present the method of establishing equity shares in weight average cost of capital (WACC), in which the value of loan capital results from the fixed assumptions accepted in the financial plan (for example a schedule of loan repayment) and own equity is evaluated by...

This paper presents a formal derivation of general expressions for Ke and WACC in perpetuities with constant growth, which do not make any assumption on what the proper discount rate is to be applied to the firm's tax shield, and are complemented with numerical examples of its application....

Llano-Ferro (2009) proposes a solution to avoid 'significant errors' when the Weighted Average Cost of Capital (WACC) obtained by the standard formula leads to significant errors in Net Present Value of the Firm calculations; particularly in those that apply to perpetual cash flow series. In...