Graphical Summary of the Basic Ideas on Valuation

Abstract

This is a summary of the basic ideas on valuation depicted as a conceptual map. Under the assumption that Capital Asset Pricing Model, CAPM, works and that the discount rate for the tax savings is Ku, I show the sequence of calculations and interactions among the variables, beta, values, cash flows and discount rates. We might consider that Ku is the origin of everything.

Note: The Spanish version is available at: http://ssrn.com/abstract=892488

Keywords: WACC, valuation methods, cash flows

JEL Classification: D61, G31, H43