Valuation of Cash Flows with Constant Leverage: Further Insights
It is widely known that if the leverage is constant over time, then the cost of equity and the Weighted Average Cost of Capital (WACC) for the free cash flow, FCF, is constant over time. In other words, it is inappropriate to use a constant WACCFCF to discount the free cash flow (FCF) if the leverage changes over time and some conditions are not satisfied. However, it is common to find analysts who inconsistently use a constant WACCFCF even if the leverage is not constant and the proper conditions are not satisfied. In this teaching note, we use a simple numerical example to illustrate how to modelcash flows that are consistent with constant leverage. We verify the consistency of the example with two basic principles: conservation of cash flows and conservation of values. The note is based on a previous one and includes the procedure to value with constant leverage when some restrictive conditions are not satisfied.
An Embarrassment of Riches: Winning Ways to Value with the WACC
Existen diversas maneras de calcular el Coste Promedio Ponderado de Capital (CPPC) o WACC (Weighted Average Cost of Capital) y para el principiante, la pletora de posibilidades puede ser confusa. Presentamos, pues, un marco general para la clasificacion de los CPPC que se aplican al FCF y al CCF. Por el momento, evitamos las complejidades. Para facilitar el debate, clasificamos los diversos CPPC en tres dimensiones. Esperamos que dicho marco estructural ayude al lector a hacer la correcta eleccion con respecto al calculo del coste de capital en la practica. En primer lugar, mostramos un debate cualitativo sobre las dimensiones de dicho marco. En segundo lugar, especificamos las formulas y calculos apropiados para las celdas del cuadro. Al principio, es importante subrayar que este articulo trata unicamente con flujos de caja finitos o finite cash flows. A nuestro parecer, es mejor analizar expresiones para el coste de capital que sean relevantes para los finite cash flow, para lo que no se necesita mayor justificacion. Seguir usando formulas de coste de capital apropiadas para los cash flows a perpetuidad resulta inexplicable e incomprensible. Desde un punto de vista practico, los free cash flows se derivan de los balances financieros, que no se construyen a perpetuidad. En el mejor de los casos, las expresiones para el coste de capital derivadas de los cash flows a perpetuidad pueden ser aproximaciones razonables para los finite cash flows. En el peor de los casos, los resultados pueden ser equivocos.
Portable Computing in Psychiatry
Personal digital assistants (PDAs) or handheld computers have become more popular in the practice of medicine. These devices have implications for psychiatric practice, and this paper reviews various published articles describing their use. The literature demonstrates their use in document editing, patient tracking, accessing medical information and drug reference guides, prescription writing, and medical education. Security on these devices is covered, and the value and increasing implementation of PDAs in psychiatry is discussed.