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DF for SVA

This topic has 3 replies, 2 voices, and was last updated 12 years ago by John Moffat.

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November 26, 2012 at 6:40 am #55754
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.
November 26, 2012 at 8:26 pm #108730
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.
November 26, 2012 at 10:18 pm #108731
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?
November 27, 2012 at 4:22 pm #108732
John Moffat
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Yes it would be Ke (but we don’t use FCFE when calculating SVA)
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