nep-cfn New Economics Papers
on Corporate Finance
Issue of 2010‒09‒03
five papers chosen by
Zelia Serrasqueiro
University of the Beira Interior

  1. Cost of Capital, Cost of Equity and Value Without Circularity for Constant Growth Perpetuities By Felipe Mejía; Ignacio Velez Pareja
  2. Cost of Capital with Levered Cost of Equity as the Risk of Tax Shields By Joseph Tham; Ignacio Velez Pareja
  3. Cost of Equity and WACC for Perpetuities with Constant Growth By Felipe Mejia; Ignacio Velez Pareja
  4. Working Capital Management (Slides) By Ignacio Velez Pareja
  5. The Social Capital of Venture Capitalists and Its Impact on the Funding of Start-Up Firms By Alexy, O.; Block, J.H.; Sandner, P.G.; Wal, A.L.J. Ter

  1. By: Felipe Mejía; Ignacio Velez Pareja
    Abstract: This paper presents a formulation for the cost of equity, the WACC, and the value of equity and firm for growing perpetuities without circularity, using some previous results. We also derive a relationship between leverage, D%, and growth, given a value of debt at instant zero.
    Date: 2010–08–22
  2. By: Joseph Tham; Ignacio Velez Pareja
    Abstract: We present the derivation of cost of capital under the assumption of risky tax shields discounted with the cost of levered equity. We show that the formulation is consistent and is derived from basic financial principles. This formulation is valid for finite cash flows and non growing perpetuities. In addition, it can be calculated without the circularity between value and discount rate.
    Date: 2010–08–22
  3. By: Felipe Mejia; Ignacio Velez Pareja
    Abstract: This paper shows a formulation for the cost of equity and the WACC for growing perpetuities. Some authors have derived the general expressions for those formulas but not specifically for perpetuities with constant growth. The result obtained is that a previously general formulation for a finite number of periods is also valid for growing perpetuities.
    Date: 2010–08–22
  4. By: Ignacio Velez Pareja
    Abstract: This is a course material (slides in pdf format) for Financial Analysis and Control already in SSRN. In these slides I present a detailed explanation of different tools commonly used in financial management and specifically Working Capital Management. We introduce some examples in the slides and they serve more as quick review for the written material of the main chapter than a summarized (bulleted) guide for conducting a lecture. However, I use them as a guide for my lectures.
    Date: 2010–08–22
  5. By: Alexy, O.; Block, J.H.; Sandner, P.G.; Wal, A.L.J. Ter
    Abstract: How does the social capital of venture capitalists (VCs) affect the funding of start-ups? Extant entrepreneurship literature conceptualizes a substitute effect between the social and financial capital that new firms attain from their investors. On the contrary, by building on the rich social capital literature, we hypothesize a positive effect of VCs’ social capital, derived from past syndication, on the amount of money that start-ups receive. Specifically, we argue that both structural aspects of VCs’ social network, such as the number of connections and the spanning of structural holes, and relational aspects, such as the diversity of network partners’ attributes, provide VCs with superior access to information about current investment objects and opportunities to leverage them in the future, increasing their willingness to invest in these firms. Our empirical results, derived from a novel dataset containing more than 5,000 funding rounds in the Internet and IT sector, strongly confirm our hypotheses. Both structural and relational attributes of VCs’ syndication networks have a significant influence on the funds received by start-up firms, highlighting the importance of a social capital perspective on new venture funding. We discuss the implications of our findings for theories of venture capital and entrepreneurship, showing that the role and effect of VCs’ social capital on start-up firms is much more complex than previously argued in the literature.
    Keywords: venture capital;social capital;start-ups;social networks;structural holes
    Date: 2010–06–26

This nep-cfn issue is ©2010 by Zelia Serrasqueiro. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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