The Weighted Average Cost of Capital (WACC) for Firm Valuation Calculations: A Reply

descriptionPublicationkeyboard_double_arrow_right Article , Other literature type 01 Jan 2009 English Publisher:Elsevier BVJournal:SSRN Electronic Journal (eissn: 1556-5068,

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Authors: Ignacio Velez-Pareja;

doi: 10.2139/ssrn.1428812

The Weighted Average Cost of Capital (WACC) for Firm Valuation Calculations: A Reply

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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.

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