Ten Badly Explained Topics in Most Corporate Finance Books

13 Pages Posted: 28 Apr 2012 Last revised: 12 Oct 2017

Multiple version iconThere are 2 versions of this paper

Date Written: November 17, 2015


This paper addresses 10 corporate finance topics that are not well treated (or not treated at all) in many Corporate Finance Books. The topics are: 1. Where the WACC equation comes from. 2. The WACC is not a cost. 3. How is the WACC equation when the value of debt is not equal to its nominal value. 4. Textbooks differ a lot on their recommendations regarding the equity premium. 5. The term equity premium is used to designate four different concepts. 6. Which Equity Premium do professors and practitioners use? 7. Calculated (historical) betas change dramatically from one day to the next. 8. Why many professors continue using calculated (historical) betas in class? 9. EVA does not measure Shareholder value creation. 10. The relationship between the WACC and the value of the tax shields (VTS).

Keywords: WACC, beta, equity premium, EVA, value of tax shields, required return to equity

JEL Classification: G12, G31, M21

Suggested Citation

Fernandez, Pablo, Ten Badly Explained Topics in Most Corporate Finance Books (November 17, 2015). Available at SSRN: https://ssrn.com/abstract=2044576 or http://dx.doi.org/10.2139/ssrn.2044576

Pablo Fernandez (Contact Author)

IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
+34 91 357 0809 (Phone)
+34 91 357 2913 (Fax)

HOME PAGE: http://web.iese.edu/PabloFernandez/

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