This teaching note shows the relationship between levered and unlevered betas and the general formulation for the cost of equity. It also shows, step by step, the procedure to estimate betas from data found in the stock market.It shows well known procedures for estimating betas: correlation...

Este trabajo muestra la relación entre las betas apalancadas y sin deuda y la formulación general para el costo del capital. También muestra, paso a paso, el procedimiento para calcular las betas a partir de los datos que se encuentran en el mercado de valores. Se muestran procedimientos...

The Spanish version of this paper can be found http://ssrn.com/abstract=1899685This paper estimates the value of tax shields, using the discounted cash flow method for 23 major non financial firms listed in the Bolsa de Valores de Colombia (Colombian Stock Exchange) between 2001 and 2010. Our...

The English version of this paper can be found at http://ssrn.com/abstract=1919305This paper estimates the value of tax shields, using the discounted cash flow method for 23 major non financial firms listed in the Bolsa de Valores de Colombia (Colombian Stock Exchange) between 2001 and 2010. Our...

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...

In this note, we comment on and discuss the weirdness and absurdity of the idea that Professor Fernandez has argued for. 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...

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....