The Weighted Average Cost of Capital (WACC) for firm valuation calculations: A reply

Ignacio Velez-Pareja ()

No 5690, Proyecciones Financieras y Valoración from Master Consultores

Abstract: 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 this paper we show that there are not "significant errors" but a wrong use of the formula and improper calculations of values.

Keywords: Weighted Average Cost of Capital; WACC; firm valuation; capital budgeting; equity cost of capital (search for similar items in EconPapers)
JEL-codes: D61 G31 H43 (search for similar items in EconPapers)
Pages: 8
Date: 2009-07-05
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Persistent link: https://EconPapers.repec.org/RePEc:col:000463:005690

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