Valoración de flujos de caja en inflación. El caso de la regulación en el Banco Mundial
[Cash Flow Valuation in an Inflationary World. The Case of World Bank for Regulated Firms]
AbstractWe show that project evaluation should be based on free cash flows at nominal prices. We present a case where the results from the constant price method are biased upwards and there is a risk to accept bad projects. It is a widespread practice to evaluate projects at constant prices. With an example presented in the training on economic regulation of public utilities developed by the World Bank Institute we asses that methodology. We show an overvaluation of 21% when compared with the current prices methodology and using a correct Weighted Average Cost of Capital, WACC.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 12507.
Date of creation: 24 Feb 2005
Date of revision: 05 Jan 2009
World Bank; regulatory policy for infrastructure; developing countries; project evaluation; project appraisal; firm valuation; cost of capital; cash flows; free cash flow; capital cash flow;
Other versions of this item:
- Ignacio Velez-Pareja, 2009. "Valoracion de flujos de caja en inflacion. El caso de la regulacion en el Banco Mundial," PROYECCIONES FINANCIERAS Y VALORACION 005666, MASTER CONSULTORES.
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
- K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
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- Estache, Antonio & Rodriguez Pardina, Martin & Rodriguez, Jose Maria & Sember, German, 2003. "An introduction to financial and economic modeling for utility regulators," Policy Research Working Paper Series 3001, The World Bank.
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