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)

Paper: SSRN 254587

Abstract

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

Most finance textbooks

Complexity vs Empirical Score

• Math Complexity: 6.0/10
• Empirical Rigor: 2.0/10
• Quadrant: Lab Rats — theoretically deep, empirically untested

Why this score: 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.

Research Flowchart

  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"]