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Cash Flow Valuation in an Inflactionary World. The Case of World Bank for Regulated Firms

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  • Ignacio Vélez-Pareja

    (Politécnico Grancolombiano.)

Abstract

En el presente artículo demostramos que la evaluación de proyectos debería basarse en free cash flow a precios nominales. Presentamos un caso en el que los resultados obtenidos a partir de la aplicación de un método de precio constante se inclinan hacia arriba, por lo que existe el riesgo de aceptar malos proyectos. Es una práctica extendida evaluar proyectos a un precio constante. Evaluamos esta metodología a través de un ejemplo presentado en un curso de formación sobre regulación económica de las empresas de servicios públicos, desarrollado por el Instituto del Banco Mundial. Identificamos una sobrevaloración del 21% cuando se compara con la metodología de los precios actuales, usando un correcto costo promedio del capital (WACC por sus siglas en inglés).

Suggested Citation

  • Ignacio Vélez-Pareja, 2007. "Cash Flow Valuation in an Inflactionary World. The Case of World Bank for Regulated Firms," Economic Analysis Working Papers (2002-2010). Atlantic Review of Economics (2011-2016), Colexio de Economistas de A Coruña, Spain and Fundación Una Galicia Moderna, vol. 6, pages 1-19, November.
    • Handle: RePEc:eac:articl:12/06
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    References listed on IDEAS

    as
    1. Tim Coelli & Antonio Estache & Sergio Perelman & Lourdes Trujillo, 2003. "A Primer on Efficiency Measurement for Utilities and Transport Regulators," World Bank Publications - Books, The World Bank Group, number 15149.
    2. Joseph Tham & Ignacio V√©lez Pareja, 2004. "Top 9 (Unnecessary and Avoidable) Mistakes in Cash Flow Valuation," Proyecciones Financieras y Valoración 3648, Master Consultores.
    3. Ignacio Vélez-Pareja & Antonio Burbano-Pérez, 2006. "A Practical Guide for Consistency in Valuation: Cash Flows, Terminal Value and Cost of Capital," Economic Analysis Working Papers (2002-2010). Atlantic Review of Economics (2011-2016), Colexio de Economistas de A Coruña, Spain and Fundación Una Galicia Moderna, vol. 5, pages 1-16, June.
    4. Ignacio V√©lez Pareja, 1999. "Project Evaluation in an Inflationary Environment," Proyecciones Financieras y Valoración 3391, Master Consultores.
    5. Richard S Ruback, 2002. "Capital Cash Flows: A Simple Approach to Valuing Risky Cash Flows," Financial Management, Financial Management Association, vol. 31(2), Summer.
    6. Goldschmidt, Yaaqov & Yaron, Jacob, 1991. "Inflation adjustments of financial statements : application of international accounting standard 29 : financial reporting in hyperinflationary economies," Policy Research Working Paper Series 670, The World Bank.
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    Cited by:

    1. Ignacio Vélez-Pareja & Joseph Tham & Viviana Fernández, 2005. "Adjustment of the WACC with Subsidized Debt in the Presence of Corporate Taxes: The N-Period Case," Economic Analysis Working Papers (2002-2010). Atlantic Review of Economics (2011-2016), Colexio de Economistas de A Coruña, Spain and Fundación Una Galicia Moderna, vol. 4, pages 1-19, October.
    2. Ignacio Vélez-Pareja & Rauf Ibragimov & Joseph Tham, 2008. "Constant Leverage And Constant Cost Of Capital: A Common Knowledge Half-Truth," Estudios Gerenciales, Universidad Icesi.

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    More about this item

    JEL classification:

    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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