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Timanco S.A.: Unpaid Taxes, Losses Carried Forward, Foreign Debt, Presumptive Income and Adjustment for Inflation: Matching DCF and EVA©

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  • Ignacio Velez Pareja
  • Joseph Tham

Abstract

There are methods to match value added approaches (Residual Income Method, RIM and Economic Value Added, EVA) with discounted cash flow methods, DCF. In this note we use a real life case from an emerging country to illustrate the matching, with complexities such as unpaid taxes, losses carried forward, foreign exchange debt, presumptive income and inflation adjustments to the Financial Statements. In all methods we use market values to calculate the discount rates. We stress what have been said before: for a single period, RI or EVA does not measure value. Hence we include cash flow expectations and market values in the calculation of discount rates and values.

Suggested Citation

  • Ignacio Velez Pareja & Joseph Tham, 2010. "Timanco S.A.: Unpaid Taxes, Losses Carried Forward, Foreign Debt, Presumptive Income and Adjustment for Inflation: Matching DCF and EVA©," Proyecciones Financieras y Valoración 7319, Master Consultores.
    • Handle: RePEc:col:000463:007319
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    More about this item

    Keywords

    Economic Value Added; EVA; Market Value Added; MVA; Residual Income; economic profit; free cash flows; market value of equity; market value of firm; Losses carried forward; exchange losses; presumptive Income; inflation adjustments to the Financial Statements;
    All these keywords.

    JEL classification:

    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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