Abstract: This discussion paper is the first step of an extensive monograph on the valuation of firms using the dcf-framework (discounted cash-flow). There are a many plenty of papers on the subject but the authors are convinced believe that a lot of them are not based on a proper and stringent concept of cost of capital. In this paper monograph cost of capital are defined as conditional expected returns. By doing so we are able to reestablish well known results on dcf as well as establishing many new relations between the traditional two financing policies (constant amount of debt and constant leverage ratio) so far known. We are also able to add two new financing schemes that depend on leverage ratio based on book value and on deterministic dividend payments. Our paper has two major drawbacks: it rests on riskfree debt which is in line with many publications on dcf but still far from reality. And second this paper concentrates on firm income tax neglecting personal income taxes. Both issues will be tackled from now on.
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