WACC: related pages

Discount rate

The rate used to calculate the present value of future cash flows in a discounted cash flow calculation.

NPV (net present value)

The current value of a stream of future cash flows, negative or positive.

Adjusted present value

An alternative to NPV. Cash flows are discounted using the cost of equity (instead of the WACC) and a separate adjustment is made for financing (i.e, the tax savings.

EVA (Economic value added)

The excess of actual returns over the minimum required by the suppliers of capital. Useful as a tool for evaluating management performance than for rather than for valuation.

MIRR

MIRR is a variant of IRR which has several advantages including a single answer and a more sensible reinvestment assumption.

NOPAT

Net Operating Profit After Tax. The profit made for all providers of capital, both shareholders and debt holders.

Payback period

The time taken to recover the initial investment. A seriously flawed method of evaluating investments.

RoI

The profit an investment generates as a proportion of the value of the assets used to generate it.

ROIC

Profit as a proportion of the total capital invested in a business rather than assets shown in the balance sheet.