8 topics badly explained by many Finance Professors

Fernandez, Pablo, 18 topics badly explained by many Finance Professors (October 20, 2018). Available at SSRN: https://ssrn.com/abstract= “This paper addresses 18 finance topics that are badly explained by many Finance Professors. The topics are: 1. Where does the WACC equation come from? 2. The WACC is not a cost. 3. The WACC equation when the value of debt is not equal to its nominal value. 4. The term equity premium is used to designate four different concepts. 5. Textbooks differ a lot on their recommendations regarding the equity premium. 6. Which Equity Premium do professors, analysts and practitioners use? 7. Calculated (historical) betas change dramatically from one day to the next. 8. Why do many professors still use calculated (historical) betas in class? 9. EVA does not measure Shareholder value creation. 10. The relationship between the WACC and the value of the tax shields (VTS). 11. Beta and CAPM do not explain anything about expected or required returns. 12.…

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