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2010•Proyecciones Financieras y ValoraciónRequires access

Cost of Equity and WACC for Perpetuities with Constant Growth

Felipe Mejía, Ignacio Vélez Pareja

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Abstract

This paper shows a formulation for the cost of equity and the WACC for growing perpetuities. Some authors have derived the general expressions for those formulas but not specifically for perpetuities with constant growth. The result obtained is that a previously general formulation for a finite number of periods is also valid for growing perpetuities.

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What this paper is about

This paper shows a formulation for the cost of equity and the WACC for growing perpetuities. Some authors have derived the general expressions for those formulas but not specifically for perpetuities with constant growth. The result obtained is that a previously general formulation for a finite number of periods is also valid for growing perpetuities.

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Available abstract

This paper shows a formulation for the cost of equity and the WACC for growing perpetuities. Some authors have derived the general expressions for those formulas but not specifically for perpetuities with constant growth. The result obtained is that a previously general formulation for a finite number of periods is also valid for growing perpetuities.

Key concepts: Perpetuity, Weighted average cost of capital, Economics, Econometrics, Equity (law), Cost of equity, Free cash flow, Constant (computer programming)

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