Estimation of the weighted average cost of capital (WACC) for the cattle sector applying montecarlo simulation: colombian case
DOI:
https://doi.org/10.22519/22157360.1342Keywords:
WACC, montecarlo method, debt cost, resource costAbstract
This paper presents the results of the simulation of economic scenarios applied to the cattle sector in a Colombian region. The analysis of this study, starts from the components of the Weighted Average Capital Cost (WACC), the Modigliani and Miller thesis, the complementary theories, the contributions of the Sharpe model and its modifications, as well as the Markowitz applications and the use of the Monte Carlo Method. The projection (simulation) allowed to evaluate partially the financing, throughout the different types of distribution for debt costs, own costs, risk free rate and country risk, in order to propose an optimal WACC for the sector over the multiple variables that characterize the reality of livestock farming. The results are an approximation of optimal financing between own resources and external debt for a productive activity such as livestock.
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