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Debt Valuation, Enterprise Assessment And Applications

In: Risk Management And Value Valuation and Asset Pricing

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  • Didier Vanoverberghe

    (Ingénieur général des Télécommunications, France)

Abstract

The interactive impact of the leverage effects of debt, of taxes, of the risk of bankruptcy and the generation of free cash flow, on the enterprise value, is a constant concern for business leaders in order to make investments and financial decisions. We will focus on that topic throwing a new light on recent theoretic developments in the framework of: cost information, cost of bankruptcy, tax savings, coupons, and principal payments of the debt. In this framework, this chapter:— provides the equity value as a Call of the enterprise value on the debt increased by the coupons effects and the risk of bankruptcy effects;— demonstrates that the values of the different assets have stochastic drifts μ and volatilities σ— gives the values of these rates;— provides an adjusted CAPM and an instantaneous Beta which is stochastic and time-dependent, that better fits with the current reality;— make the link between the various models studied of which the usual model is of the financial analysts Discounted Cash Flow (DCF).

Suggested Citation

  • Didier Vanoverberghe, 2008. "Debt Valuation, Enterprise Assessment And Applications," World Scientific Book Chapters, in: Mondher Bellalah & Jean-Luc Prigent & Jean-Michel Sahut & Georges Pariente & Olivier Levyne & Michel (ed.), Risk Management And Value Valuation and Asset Pricing, chapter 15, pages 379-435, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812770745_0015
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    Keywords

    Risk; Value; Management; Derivatives;
    All these keywords.

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