DF for SVA

This topic contains 3 replies, has 2 voices, and was last updated by Avatar of johnmoffat John Moffat 1 year, 4 months ago. This post has been viewed 42 times

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    dazhong0703
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    I read from OpenTuition revision notes, the discount rate for Shareholder Value Added is the company’s WACC. But I think should be Ke, because SVA links to FCFE.


    Avatar of johnmoffat
    John Moffat
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    No.

    SVA is present value of free cash flows discounted at WACC, less the value of the company’s debt.


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    dazhong0703
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    Ya, I realize that the revision notes used FCF, therefore WACC is correct. If use FCFE, should it be Ke?


    Avatar of johnmoffat
    John Moffat
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    Yes it would be Ke (but we don’t use FCFE when calculating SVA)

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