Market Value Calculation and the Solution of Circularity Between Value and the Weighted Average Cost of Capital WACC (A Note on the Weighted Average Cost of Capital WACC)

ArXiv ID: ssrn-254587 “View on arXiv”

Authors: Unknown

Abstract

La versión española de este artículo se puede encontrar en http://ssrn.com/abstract=279460

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Keywords: education, pedagogy, financial literacy, textbook analysis, financial education

Complexity vs Empirical Score

• Math Complexity: 6.0/10
• Empirical Rigor: 2.0/10
• Quadrant: Lab Rats
• Why: The paper deals with advanced financial mathematics, including derivations for WACC and the cost of equity under different tax shield discount rate assumptions, but lacks any empirical backtesting or implementation details.

  flowchart TD
    Q["Research Goal: Solve Circularity<br>in WACC & Market Value"] --> M["Key Methodology<br>Algebraic Derivation"]
    M --> D["Data/Inputs<br>Cost of Equity Ke<br>Cost of Debt Kd<br>Corporate Tax T"]
    D --> C["Computational Process<br>V = (FCF / WACC)<br>WACC = E/V·Ke + D/V·Kd·1-T"]
    C --> F["Key Findings/Outcomes<br>Explicit V Formula Derived<br>Iterative Convergence Shown<br>Pedagogical Clarity Achieved"]