THE WEIGHTED AVERAGE COST OF CAPITAL IN FIRMS’ EVALUATION IN BRAZIL: AN INQUIRY OF THE ACADEMIC ADHERENCE AND THE MARKET PRACTICE

• Autor(a) principal: Cunha, Moisés Ferreira
• Data de Publicação: 2013
• Outros Autores: Morais Pereira, Ednei, Ferreira da Cruz, Alethéia, José Rech, Ilírio
• Tipo de documento: Artigo
• Idioma: por
• Título da fonte: Revista Ambiente Contábil
• Texto Completo: https://periodicos.ufrn.br/ambiente/article/view/4142

The aim of this paper is to investigate the adherence between practice and the current literature about the use of the Weighted Average Cost of Capital (WACC). To verify the market practice, an analysis on the reports of the economic and financial valuation for Initial Public Offering (IPO) purposes, available on the Comissão de Valores Mobiliários (CVM) from 2004 to 2009, has been made. From the results, the conclusion is that 79 per cent of the reports correctly applied the WACC approach as the right discount rate for the free cash flow of the firm, but only 5 per cent used the market values for the ratio of equity and debts to calculate this rate, moreover, just these reports (5 per cent) used the variable discount rate over the projected period. Also, it became evidence that in the forecast of an “optimal” capital structure in book value, the discount rate used in valuations is predominant, what goes against the current literature and showing a lack of adherence between practice and current researches.Keywords: Firms’ evaluation; Weighted Average Cost of Capital; Initial Public Offering.