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Cost of Equity and WACC for Perpetuities with Constant Growth

Author

Listed:
  • Felipe Mejia
  • Ignacio Velez Pareja

Abstract

This paper shows a formulation for the cost of equity and the WACC for growing perpetuities. Some authors have derived the general expressions for those formulas but not specifically for perpetuities with constant growth. The result obtained is that a previously general formulation for a finite number of periods is also valid for growing perpetuities.

Suggested Citation

  • Felipe Mejia & Ignacio Velez Pareja, 2010. "Cost of Equity and WACC for Perpetuities with Constant Growth," Proyecciones Financieras y Valoración 7316, Master Consultores.
    • Handle: RePEc:col:000463:007316
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    File URL: http://ssrn.com/abstract=1651662
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    More about this item

    Keywords

    Firm Valuation; Cost of Capital; Cost of Equity; Perpetuities; Constant Growth; Cash Flow; Free Cash Flow; WACC;
    All these keywords.

    JEL classification:

    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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