Title: Deriving the Capital Cash Flow Method as a Rational Return Expectation
Abstract: This note shows that a rational investor (as defined here) will use the capital cash flow (CCF) method to perform enterprise valuations, which implies that the most appropriate discount rate for the tax benefits of debt is the cost of unlevered equity. This result is useful as the CCF method allows derivation of a stable expression for the cost of unlevered equity in terms of the cost of levered equity and the cost of debtirrespective of the shape of the cash-flow forecast.
Publication Year: 2006
Publication Date: 2006-01-01
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 1
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