TY  - JOUR 
TI  - There exists circularity between WACC and value? Another solution.
PB  - Universidad Icesi
PY  - 2006
issn 01235923
AB  - Although we know there exists a simple
approach to solve the circularity
between value and the discount rate,
known as the Adjusted Present Value
proposed by Myers, 1974, it seems
that practitioners still rely on the
traditional Weighted Average Cost of
Capital, WACC approach of weighting
the cost of debt, Kd and the cost
of equity, Ke and discounting the Free
Cash Flow, FCF. We show how to solve
circularity when calculating value
with the free cash flow, FCF and the
WACC. As a result of the solution we
arrive at a known solution when we
assume the discount rate of the tax
equity: the capital cash flow, CCF discounted
at Ku. When assuming Kd
as the discount rate for the tax savings,
we find an expression for calculating
value that does not implies
circularity. We do this for a single
period and for N periods.
KW  - Firm valuation
KW  - Cost of capital
KW  - Cash flow
KW  - Free cash flow
KW  - Negocios y management
KW  - Economía
KW  - Producción intelectual registrada - Universidad Icesi
KW  - Economics
KW  - Business
UR  - http://www.icesi.edu.co/revistas/index.php/estudios_gerenciales/article/view/182
ER  -