Adjusted present value (APV): avaliação de negócios com taxas de desconto diferenciadas

Abstract

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.