Source:Harvard Business School

Assumptions: Asset Beta= 1

Riskfree rate= 10%
Risk premium= 8%
Debt-to-value ratio= 40%
Debt= 2,927 3,947

Table A
Capital Cash Flow Valuation (CCF)

Growth Rate
0% 5%
Sales 5,000 5,000
EBIT margin 40% 40%

EBIT 2,000 2,000

Depreciationa 10% 500 500

Capital Expenditures b
(500) (525)
Change in Working Capitalc 20% 0 (50)

Operating Cash Flow 2,000 1,925

Tax at 40% of EBIT less interestd 40% (683) (642)

Capital Cash Flowe 1,317 1,283

Expected Asset Returnf 18.0% 18.0%

Calculated by Capital Asset Pricing Model CAPM
=[Riskfree rate + (Asset Beta x Risk Premium)}

Capital Cash Flow Valueg 7,317 9,868

Interest 10% (293) (395)

Assumptions: Asset Beta= 1
Riskfree rate= 10%
Risk premium= 8%
Debt-to-value ratio= 40%
Debt= 2,927 3,947

Table B
Equity Cash Flow Valuation

Growth Rate
0% 5%
Sales 5,000 5,000
EBIT margin 40% 40%

EBIT 2,000 2,000

Depreciationa 10% 500 500
Capital Expenditures b
(500) (525)
Change in Working Capital c
20% 0 (50)

Operating Cash Flow 2,000 1,925

Tax at 40% of EBIT less interestd 40% (683) (642)

Interest (293) (395)

Increase (decrease) in debte 197
Debt Cash Flow (293) (197)

Equity Cash Flowf 1,024 1,086

Expected Equity Returng 23.3% 23.3%

Calculated by Capital Asset Pricing Model CAPM
=[Riskfree rate + (Equity Beta x Risk Premium)}

Equity Cash Flow Valueh 4,390 5,921

Debt Valuei 2,927 3,947

Equity Cash Flow and Debt Value 7,317 9,868

Interest 10% (293) (395)

Assumptions: Asset Beta= 1
Riskfree rate= 10%
Risk premium= 8%
Debt-to-value ratio= 40%
Debt= 2,927 3,947

Table C
Free Cash Flow Valuation

Growth Rate
0% 5%
Sales 5,000 5,000
EBIT margin 40% 40%

EBIT 2,000 2,000

Depreciationa 10% 500 500
Capital Expenditures b
(500) (525)
Change in Working Capital c
20% 0 (50)

Operating Cash Flow 2,000 1,925

Tax at 40% of EBIT 40% (800) (800)

Free Cash Flowd 1,200 1,125

Weighted Average Cost of Capitale 16.4% 16.4%

Free Cash Flow Valuef 7,317 9,868

WACC % Riskfree rate Tax A/T Rate WACC

Debt 40% 10.0% 40.0% 6.0% 2.4%
Equity 60% 23.3% 23.3% 14.0%
16.4%
 12 meses
Precio Unit Po $ 2.00 P1 $ 2.09
Inversión Ko $ 100.00 K1 $ 106.96
Cantidad Qo $ 50.00 Q1 $ 51.18

Inflación f 4.50%
Intéres Nominal In 6.75%
Plazo 12
Tasa Real r 2.36%

Ie 6.96% r= (Ko/Po) -1
(K1/P1)

r= K1*Po -1
Ko*P1

r = Ko*(1+Ie)*Po -1
Ko*Po*(1+f)

r= 1+Ie -1
1+f
ECUACIÓN DE FISHER

r= 2.36%