Valoración de flujos de caja en inflación. El caso de la regulación en el Banco Mundial

Cash Flow Valuation in an Inflationary World. The Case of World Bank for Regulated Firms

Ignacio Velez-Pareja ()

MPRA Paper from University Library of Munich, Germany

Abstract: We show that project evaluation should be based on free cash flows at nominal prices. We present a case where the results from the constant price method are biased upwards and there is a risk to accept bad projects. It is a widespread practice to evaluate projects at constant prices. With an example presented in the training on economic regulation of public utilities developed by the World Bank Institute we asses that methodology. We show an overvaluation of 21% when compared with the current prices methodology and using a correct Weighted Average Cost of Capital, WACC.

Keywords: World Bank; regulatory policy for infrastructure; developing countries; project evaluation; project appraisal; firm valuation; cost of capital; cash flows; free cash flow; capital cash flow (search for similar items in EconPapers)
JEL-codes: G12 G31 K23 L51 L94 (search for similar items in EconPapers)
Date: 2005-02-24, Revised 2009-01-05
New Economics Papers: this item is included in nep-ppm
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Published in Academia. Revista Latinoamericana de Administración, CLADEA 36 (2006): pp. 24-49

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Related works:
Working Paper: Valoracion de flujos de caja en inflacion. El caso de la regulacion en el Banco Mundial (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:12507

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