The Holy Grail in the Quest for Value (with Alpha Methods and Omega Theories) (Chen Thanh Trong Tim Kiem Gia Tri (Theo CAC Mo Hinh Alpha Va Ly Thuyet Omega)

Financial Project Appraisals Working Paper No. 002-03

20 Pages Posted: 25 Jun 2003

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: March 21, 2003

Abstract

In the recent writings on valuation, there is no consensus about the correct formulas for calculating the relevant cost of capital in an M & M world. The proliferation of alpha number of methods and omega number of theories for the calculation of the cost of capital is puzzling because in the derivation of the original M & M result, the use of the no-arbitrage argument would suggest that there should only be a single result.

In this non-technical, introductory teaching note, we would like to present a simple, general and unified approach to valuation in an M & M world. The Holy Grail in the Quest for Value (with alpha methods and omega theories) is rho, the required return to unlevered equity.

Note: The downloadable document is in Vietnamese. The English version is available at http://ssrn.com/abstract=269929

JEL Classification: D61, G31, H43

Suggested Citation

Velez-Pareja, Ignacio and Tham, Joseph, The Holy Grail in the Quest for Value (with Alpha Methods and Omega Theories) (Chen Thanh Trong Tim Kiem Gia Tri (Theo CAC Mo Hinh Alpha Va Ly Thuyet Omega) (March 21, 2003). Financial Project Appraisals Working Paper No. 002-03. Available at SSRN: https://ssrn.com/abstract=395000 or http://dx.doi.org/10.2139/ssrn.395000

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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