Valoración de flujos de caja en inflación. El caso de la regulación en el Banco Mundial

Vélez-Pareja, Ignacio (2005): Valoración de flujos de caja en inflación. El caso de la regulación en el Banco Mundial. Published in: Academia. Revista Latinoamericana de Administración, CLADEA No. 36 (2006): pp. 24-49.

Abstract

We show that project evaluation should be based on free cash flows at nominal prices. We present a case where the results from the constant price method are biased upwards and there is a risk to accept bad projects. It is a widespread practice to evaluate projects at constant prices. With an example presented in the training on economic regulation of public utilities developed by the World Bank Institute we asses that methodology. We show an overvaluation of 21% when compared with the current prices methodology and using a correct Weighted Average Cost of Capital, WACC.

• Item Type: MPRA Paper
• English Title: Cash Flow Valuation in an Inflationary World. The Case of World Bank for Regulated Firms
• Language: Spanish
• Keywords: World Bank; regulatory policy for infrastructure; developing countries; project evaluation; project appraisal; firm valuation; cost of capital; cash flows; free cash flow; capital cash flow
• Subjects: L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; G - Financial Economics > G3 - Corporate Finance and Governance > G31 - Capital Budgeting ; Fixed Investment and Inventory Studies ; Capacity; K - Law and Economics > K2 - Regulation and Business Law > K23 - Regulated Industries and Administrative Law; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L94 - Electric Utilities

References

Arzac, Enrique R., 2005, Valuation for Mergers, Buyouts and Restructuring, Wiley.

Belli, P. et al., 2001, Economic Analysis of Investment Operations, World Bank

Brealey, Richard A. y Stewart C. Myers, 1996, Principles of Corporate Finance, 5a ed. McGraw-Hill.

Brealey, Richard A. y Stewart C. Myers, 2003, Principles of Corporate Finance, 7th ed. McGraw-Hill.

Brealey, Richard A., Stewart C. Myers y Alan J. Marcus, 1995, Fundamentals of Corporate Finance, McGraw-Hill

Canada, J.R. y White, Jr., J.A., 1996, Capital Investment Decision Analysis for Engineering and Management, Prentice Hall.

Coello, Tim, Estache, Antonio, Perelman, Sergio y Lourdes Trujillo, A Primer on Efficiency Measurement for Utilities and Transport Regulators, The World Bank, Washington, D.C., February 2003

Copeland, Tom, Tim Koller y Jack Murrin, 2000, Valuation. Measuring and Managing the Value of Companies, 3a ed. Wiley.

Damodaran, A., http://pages.stern.nyu.edu/~adamodar/. Visitado en abril 19, 2004

Damodaran, Aswath, 1996, Investment Valuation. Tools and Techniques for Determining the Value of any Asset, Wiley.

Dixon, John A. y Hufschmidt, Maynard M. (Eds), 1986, Economic Valuation Techniques for the Environment. A Case Study Workbook, The John Hopkins University Press.

Estache, A., Rodríguez Pardina, Martín, Rodríguez, Jose María, y Germán Sember, 2002, An Introduction to Financial and Economic Modeling for Utility Regulators, The World Bank.

Goldschmidt, Yaaqov y Jacob Yaron, Inflation adjustments of financial statements: application of international accounting standard 29: financial reporting in hyperinflationary economies, Working Papers, Agricultural Policies Agriculture and Rural Development Department. The World Bank, May 1991, WPS 670

Grinblatt, M y S. Titman, 2002, Financial Markets and Corporate Strategy, Irwin-McGraw-Hill.

International Bank for Reconstruction and Development – The World Bank, Financial Modeling of Regulatory Policy, 2 CD set, 2002

Levy, Haim y Marshall Sarnat, 1995, Capital Investment and Financial Decisions, 5th ed. Prentice Hall.

Modigliani, Franco y Merton H. Miller, 1958, The Cost of Capital, Corporation Taxes and the Theory of Investment, The American Economic Review. Vol XLVIII, pp 261-297

Modigliani, Franco y Merton H. Miller, 1959, The Cost of Capital, Corporation Finance, and the Theory of Investment: Reply, The American Economic Review, XLIX, pp. 524-527.

Modigliani, Franco y Merton H. Miller, 1963, Corporate Income Taxes and the Cost of Capital: A Correction, The American Economic Review. Vol LIII, pp 433-443.

Ross, S. A., R. W. Westerfield y J. Jaffe, 1999, Corporate Finance, Irwin-McGraw-Hill.

Ruback, Richard S., 2000, Capital Cash Flows: A Simple Approach to Valuing Risky Cash Flows, Working Paper, Social Science Research Network. También publicado en Financial Management, Vol. 31, No. 2, Summer 2002

Taggart, Jr, Robert A., 1991, Consistent Valuation Cost of Capital Expressions with Corporate and Personal Taxes, Financial Management, Autumn, pp. 8-20.

Tham, Joseph e Ignacio Vélez-Pareja, 2002, Modeling the Impacts of Inflation in Investment Appraisal, Working Paper. Disponible en Social Science Research Network (SSRN).

Tham, Joseph e Ignacio Vélez-Pareja, 2004a, Principles of Cash Flow Valuation. An Integrated Market Approach, Academic Press.

Tham, Joseph e Ignacio Vélez-Pareja, 2004b, "Top 9 (Unnecessary and Avoidable) Mistakes in Cash Flow Valuation" (January 29). http://ssrn.com/abstract=496083

Van Horne, J.C., 1997, Financial Management and Policy, 11a Ed., Prentice Hall. (La 12a edición está disponible)

Vélez-Pareja, Ignacio, 1987, Decisiones de inversión, Facultad de Administración, Universidad de los Andes, (mimeo) May, pp. 459.

Vélez-Pareja, Ignacio, 1998, Decisiones de inversión. Una aproximación al análisis de alternativas. CEJA. (Tercera edición).

Vélez-Pareja, Ignacio, 2004, Decisiones de inversión. Enfocado a la valoración de empresas, CEJA. (Cuarta edición).

Vélez-Pareja, Ignacio, 2006, Decisiones de inversión. Para la valoración financiera de proyectos y empresas, CEJA. (Quinta edición). Disponible en línea en www.poligran.edu.co/decisiones.

Vélez-Pareja, Ignacio, 2004a, "Modeling the Financial Impact of Regulatory Policy: Practical Recommendations and Suggestions. The Case of World Bank" (August 20). http://ssrn.com/abstract=580042

Vélez-Pareja, Ignacio, 1983, Note: "Replacement models: Technology inappropriate to non industrialized countries", Interfaces, Vol. 13, No. 5, October, pp. 122- 123.

Vélez-Pareja, Ignacio, 1999, "Project Evaluation in an Inflationary Environment" (February 11). Working Paper No. 2. http://ssrn.com/abstract=148410

Vélez-Pareja, Ignacio, 2004b, "The Correct Definition for the Cash Flows to Value a Firm (Free Cash Flow and Cash Flow to Equity)" (September 29). http://ssrn.com/abstract=597681

Vélez-Pareja, Ignacio, 2004c, "Valuating Cash Flows in an Inflationary Environment. The Case of World Bank" (June 27, 2004; date posted Aug 04, 2005). http://ssrn.com/abstract=765824

Vélez-Pareja, Ignacio y Antonio Burbano-Pérez, 2003, "A Practical Guide for Consistency in Valuation: Cash Flows, Terminal Value and Cost of Capital" (November 9, 2003). http://ssrn.com/abstract=466721

Vélez-Pareja, Ignacio y Joseph Tham, 2004, "Timanco S. A.: Impuestos por pagar, pérdidas amortizadas, deuda en divisas, renta presuntiva y ajustes por inflación. Su tratamiento con Flujo de Caja Descontado y EVA©. (Timanco S.A.: Unpaid Taxes, Losses Carried Forward, Foreign Deuda, Presumptive Income and Adjustment for Inflation. The Treatment with DCF and EVA©) (March 10). http://ssrn.com/abstract=438242

Vélez-Pareja, Ignacio y Joseph Tham, 2002, "Valuation in an Inflationary Environment" (May 31). http://ssrn.com/abstract=329020. Trabajo presentado en la Conferencia “Valuation in Emerging Markets” Darden School of Business Administration, University of Virginia, May 29-31, 2002, Charlottesville, Virginia.

Weston, J. Fred y Thomas E. Copeland, 1992, Managerial Finance, 9th ed. The Dryden Press