Resumo:
The business valuation process trough the discounted cash flow method is actually the most
used method of economic-financial valuation. Therefore, new valuation methods using the
idea of discounted cash flow have been developed constantly looking for the improvement of
valuation processes.
This work is related to a valuation model called Adjusted Present Value (APV). This model
has been proved effective because it divides the cash flow in components that have
managerial sense. The main cash flow here can be separated in two ways: the cash flow of
firm’s common operations and the cash flow of taxes savings. This cash flow division can be
useful to a better understanding of the valuation results.
In all process of business valuation using the discounted cash flow, there are at least three
variables involved: the cash flow, the time and the risk. The risk is what makes possible
quantify the discount rate that will be used. This work deals mainly with this variable. The
relationship between risk and expected return (or cost of capital) can be determined by asset
pricing theories and will be also emphasized here.
The union of scientific criterions to determine de cost of capital and the application of modern
business valuation models came to improve the process of investment decision.
This work also will present the APV process of application to evaluate a well-defined
business, showing special attention to the definition of discount rates or cost of capital. The
APV model will be applied in the valuation of a sugar and alcohol company.
