NEWSLETTER of September 30, 2011
The following content has been added at finexpert:
Studies > Performance
Boston Consulting Group
THE 2011 VALUE CREATORS REPORT—RISKY BUSINESS: VALUE CREATION IN A VOLATILE ECONOMY
13th annual report in the Value Creation Series. >more
Studies > Accounting
National Venture Capital Association
Fair Value, Who Cares? and Why They Should!
Issue 27 of Venture Capital Review, available at www.duffandphelps.com. >more
Studies > Macro
Roland Berger
EURECAPROJECT HELLENIC RECOVERY FUND. A SOLUTION FOR GREECE AND EUROPE
A proposal to solve the current crisis in Greece. >more
Publications > Corporate Valuation
The WACC Fallacy: The Real Effects of Using a Unique Discount Rate
Philipp Krüger, Augustin Landier and David Thesmar
Working Paper
We document investment distortions induced by the use of a single discount rate within rms. According to textbook capital budgeting, firms should value any project using a discount rate determined by the risk characteristics of the project. If they use a unique company-wide discount rate, they overinvest (resp. underinvest) in divisions with a market beta higher (resp. lower) than the firm's core industry beta. We directly test this consequence of the "WACC fallacy" and establish a robust and signifcant positive relationship between division-level investment and the spread between the division's market beta and the firm's core industry beta. >more
