Timanco S.A.: Unpaid Taxes, Losses Carried Forward, Foreign Debt, Presumptive Income and Adjustment for Inflation: Matching DCF and EVA©

42 Pages Posted: 24 Jul 2010

See all articles by Ignacio Velez-Pareja

Ignacio Velez-Pareja

Grupo Consultor CAV Capital Advisory & Valuation

Joseph Tham

Duke University - Duke Center for International Development in the Sanford School of Public Policy; Academy of Public Administration under the President of the Republic of Kazakhstan

Date Written: July 22, 2010

Abstract

There are methods to match value added approaches (Residual Income Method, RIM and Economic Value Added, EVA) with discounted cash flow methods, DCF. In this note we use a real life case from an emerging country to illustrate the matching, with complexities such as unpaid taxes, losses carried forward, foreign exchange debt, presumptive income and inflation adjustments to the Financial Statements. In all methods we use market values to calculate the discount rates.

We stress what have been said before: for a single period, RI or EVA does not measure value. Hence we include cash flow expectations and market values in the calculation of discount rates and values.

Keywords: Economic Value Added, EVA, Market Value Added, MVA, Residual Income, economic profit, free cash flows, market value of equity, market value of firm, Losses carried forward, exchange losses, presumptive Income, inflation adjustments to the Financial Statements

JEL Classification: M21, M40, M46, M41, G12, G31, J33

Suggested Citation

Velez-Pareja, Ignacio and Tham, Joseph, Timanco S.A.: Unpaid Taxes, Losses Carried Forward, Foreign Debt, Presumptive Income and Adjustment for Inflation: Matching DCF and EVA© (July 22, 2010). Available at SSRN: https://ssrn.com/abstract=1646827 or http://dx.doi.org/10.2139/ssrn.1646827

Ignacio Velez-Pareja (Contact Author)

Grupo Consultor CAV Capital Advisory & Valuation ( email )

Ave Miramar # 18-93 Apt 6A
Cartagena
Colombia
+573112333074 (Phone)

HOME PAGE: http://cashflow88.com/decisiones/decisiones.html

Joseph Tham

Duke University - Duke Center for International Development in the Sanford School of Public Policy ( email )

Box 90312
302, Towerview Dr, Rubenstein Hall, Room 272
Durham, NC 27708
United States
919-613-9234 (Phone)
919-681-0831 (Fax)

HOME PAGE: http://fds.duke.edu/db/Sanford/faculty/thamjx

Academy of Public Administration under the President of the Republic of Kazakhstan ( email )

Abay Street, 33a
Astana
Kazakhstan
+7 8 7172753422 (Phone)

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