References (11)



Three Discount Methods for Valuing Projects and the Required Return on Equity

Marc Schauten

Vrije Universiteit Amsterdam

March 5, 2010

In this paper we discuss the required return on equity for a simple project with a finite life. To determine a project’s cost of equity, it is quite common to use Modigliani and Miller’s ‘Proposition II’ (1963). However, if the assumptions of MM do not hold, ‘Proposition II’ will lead to wrong required returns and project values. This paper gives an example of how the cost of equity should be determined in order to obtain correct valuations. The methods we apply are the 'Adjusted Present Value' method, the 'Cash Flow to Equity' method and the 'WACC' method.

Number of Pages in PDF File: 24

Keywords: Proposition II, net present value, APV, CFE, WACC

JEL Classification: G12, G31, G32, H43

Open PDF in Browser Download This Paper

Date posted: March 6, 2010 ; Last revised: August 31, 2011

Suggested Citation

Schauten, Marc, Three Discount Methods for Valuing Projects and the Required Return on Equity (March 5, 2010). Available at SSRN: http://ssrn.com/abstract=1565470 or http://dx.doi.org/10.2139/ssrn.1565470

Contact Information

Marc Schauten (Contact Author)
Vrije Universiteit Amsterdam ( email )
De Boelelaan 1105
Amsterdam, 1081HV
Feedback to SSRN

Paper statistics
Abstract Views: 730
Downloads: 200
Download Rank: 114,529
References:  11

© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollobot1 in 0.203 seconds