The Holy Grail in the Quest for Value (with Alpha Methods and Omega Theories)

Joseph Tham () and Ignacio Velez-Pareja ()

No 3597, Proyecciones Financieras y Valoración from Master Consultores

Abstract: In the recent writings on valuation, there is no consensus about the correct formulas for calculating the relevant cost of capital in an M & M world. The proliferation of alpha number of methods and omega number of theories for the calculation of the cost of capital is puzzling because in the derivation of the original M & M result, the use of the no-arbitrage argument would suggest that there should only be a single result. In this non-technical, introductory teaching note, we would like to present a simple, general and unified approach to valuation in an M & M world. The Holy Grail in the Quest for Value (with alpha methods and omega theories) is rho, the required return to unlevered equity.

Keywords: Cost-Benefit Analysis (search for similar items in EconPapers)
JEL-codes: D61 (search for similar items in EconPapers)
Pages: 17
Date: 2003-03-21
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Persistent link: https://EconPapers.repec.org/RePEc:col:000463:003597

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