Increasing Shareholder Value by Utilizing Tax Opportunities
The WACC is a calculation of the ‘after-tax’ cost of capital where the tax treatment for each capital component is different. In most countries, the cost of debt is tax deductible while the cost of equity isn’t, for hybrids this depends on each case.
Some countries offer beneficial tax opportunities that can result in an increase of operational cash flows or a reduction of the WACC.
This article elaborates on the impact of tax regulation on the WACC and argues that the calculation of the WACC for Belgian financing structures needs to be revised. Furthermore, this article outlines practical strategies for utilizing tax opportunities that can create shareholder value.
Keep Track of Your Company’s Valuation Gap!
The seventh article in this series on the WACC discusses how the company’s valuation gap might be used as a potential source of shareholder value creation. It explains why current market prices, as observed on stock markets, might temporarily deviate from the intrinsic value of the company and what the implications are for strategic decisions, such as share buybacks, equity issues, dividends, mergers and acquisitions, and in/divestures.
Estimating the WACC in Emerging Markets - The Challenges
From the previous articles in this series, it can be concluded that estimating the WACC is already a diff icult exercise in a developed market. Doing the same exercise in an emerging market environment will be even more challenging. This article provides a guide to how to incorporate and assess emerging market characteristics and features in the estimation of the WACC .
One can think of inflation, a lack of reliable and consistent information, illiquid and ineff icient financial markets and sovereign risks. The article also discusses how the WACC application for evaluation of investment appraisals in emerging markets has to be done with care.
Project Selection - How to Choose the Right Project and Make Effective Comparisons
Part five of the WACC Guide examines the extent to which input, assumptions and models used for project app roval can create a biased opinion of the shareholder value.
Treasury, as the custodian of risk management, could reinforce its role as an internal consultant on cash flow and help management prepare and substantiate decisions in allocating limited resources within the company.
The Impact of Corporate Risk Management on Shareholder Value
This part looks at how risk management is an instrument that can be used to lower the WACC and create shareholder value.