WACC, Value of Tax Savings and Terminal Value for Growing and Non Growing Perpetuities

Ignacio Velez-Pareja () and Joseph Tham ()

No 3768, Proyecciones Financieras y Valoración from Master Consultores

Abstract: Although perpetuities are somewhat artificial in the sense that in practice they do not exist, they are relevant because no matter how detailed and complex a forecasted financial plan for a firm or project could be terminal value usually is calculated as perpetuity. This terminal value might be a growing or a non growing perpetuity. On the other hand, usually terminal value is a substantial part of the firm value. In this note we examine in detail the proper discount rate for cash flows in perpetuity, the present value of tax savings and the calculation of terminal value. The findings contradict what is generally accepted in the literature.

Keywords: WACC; perpetuities (search for similar items in EconPapers)
JEL-codes: D61 G31 H43 (search for similar items in EconPapers)
Pages: 35
Date: 2005-07-07
References: Add references at CitEc
Citations:

Downloads: (external link)
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=789025

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:col:000463:003768

Access Statistics for this paper

More papers in Proyecciones Financieras y Valoración from Master Consultores
Bibliographic data for series maintained by Ignacio Velez ().