The tax shield from debt represents a significant proportion of total value for many companies, projects, and transactions. Accurate valuation of the debt tax shield is of more importance than ever as leverage is now commonly used as a source of value added, and there is growing competition in...

Using a large panel of about 6,946 French manufacturing firms, this paper investigates the effect of monetary policy from 1990 to 1999 on investment through the cost of capital and the cash-flow channels. We compare several specifications of the neo-classical demand for capital, taking into...

This paper focuses adaptations to the discount cash flow (DCF) method when valuing forecasted cash flows that are biased measures of expected cash flows. I imagine a simple setting where the expected cash flows equal the forecasted cash flows plus an omitted downside. When the omitted downside...

Jensen (1986) posits that costly conflicts of interest between managers and shareholders are especially pronounced in companies with substantial amounts of free cash flow. Jensen argues that, all else equal, firms that finance assets with debt will be less prone to this agency problem of...

Our research examines the importance and influence of meeting or beating analysts' cash flow forecasts on a firm's cost of debt. We examine three important metrics related to a firm's cost of debt: initial bond rating, bond yield, and subsequent changes in bond ratings. Our results indicate...

This paper shows that risk in cash flow and accrual components of earnings is an important determinant of a firm's cost of equity beyond risk in earnings. The paper develops and tests a model that demonstrates how earnings smoothing hinders the ability of earnings to capture firm risk and how...

A comment on Miller R.A., The weighted average cost of capital is not quite right, The Quarterly Review of Economics and Finance (2007).In Discounted Cash Flow valuations, the WACC approach is very popular. Therefore, knowing which limitations the concept inherits is essential. The objective of...

The oldest Portuguese share index still being calculated is the BVL/PSI-General, one which started the daily series on 5/Jan/1988 with a base value of 1000 points. Everyday a single value is computed based on the closing prices of all the shares included in the sample. Also, all corporate events...

Richard Miller's reply (2008) to my comment (2008) on his claim (2007) that the standard WACC formula fails to correctly remunerate shareholders and bondholders raises crucial questions on the nature of the project's debt that he considers in his calculations. To clarify this point, I here...