Miles-Ezzell's WACC approach yields arbitrage

Andreas Löffler (FB Wirtschaftswissenschaften, Universität Hannover, Hannover, Germany)

A simple counterexample shows the the widely used WACC approach to value leverage firms developed by Miles and Ezzell can create an arbitrage opportunity. The only consequence to be drawn is that their WACC approach cannot be applied under the circumstances assumed by Miles and Ezzell.

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Year of publication:	2002 ; This version: July 2002
Authors:	Löffler, Andreas
Publisher:	Hannover : Univ. Hannover, Fachbereich Wirtschaftswiss.
Subject:	WACC \| leverage ratio \| tax shield \| leverage effect \| Unternehmensbewertung \| Firm valuation \| Cash Flow \| Cash flow \| Diskontierung \| Discounting \| Kapitalkosten \| Cost of capital \| Unternehmensbesteuerung \| Corporate taxation \| Arbitrage \| Theorie \| Theory