The Unbearable Longevity of the Classic Free Cash Flow (FCF) WACC: A Nontechnical Retrospection

6 Pages Posted: 28 Mar 2019

See all articles by Joseph Tham

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: March 12, 2019

Abstract

In this short note, we present a nontechnical retrospection on the unbearable longevity of the classic WACC (Weighted Average Cost of Capital) for the Free Cash Flow (FCF) in perpetuity. Over the past two decades, researchers in finance have increased greatly our understanding of the properties of the WACC. This means that the usefulness of the classic FCF WACC has long expired. However, inexplicably, it continues to live on in textbooks and websites. The resilience of the classic FCF WACC is puzzling. We discuss some unsatisfactory reasons why the classic FCF WACC continues to thrive.

Keywords: Weighted Average Cost of Capital (WACC), Free Cash Flow (FCF)

JEL Classification: D61, H43, M21, M40, M46, G12, G31, G33

Suggested Citation

Tham, Joseph, The Unbearable Longevity of the Classic Free Cash Flow (FCF) WACC: A Nontechnical Retrospection (March 12, 2019). Available at SSRN: https://ssrn.com/abstract=3351267 or http://dx.doi.org/10.2139/ssrn.3351267

Joseph Tham (Contact Author)

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

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

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

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Astana
Kazakhstan
+7 8 7172753422 (Phone)

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