Download or read book Firm Specific Information and the Cost of Equity Capital written by Philip G. Berger and published by . This book was released on 2018 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a comprehensive and large-sample measure of a firm's information quality. The measure is the ratio of firm-specific return variation to firm-specific cash-flow variation. Empirical evidence supports the validity of our measure. Using this measure, we find that cost of equity capital decreases by about 0.4% on an annual basis if a firm's information quality increases by one standard deviation. This is consistent with the joint hypotheses that (1) firm-specific stock returns contain economic information as argued by Morck, Yeung, and Yu (2000) and (2) better information quality can lower the cost of equity.
Download or read book The Effect of Exchange listing on a Firm s Cost of Equity Capital written by Dan S. Dhaliwal and published by . This book was released on 1980 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Cost of Capital written by Shannon P. Pratt and published by John Wiley & Sons. This book was released on 2008-02-25 with total page 448 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this long-awaited Third Edition of Cost of Capital: Applications and Examples, renowned valuation experts and authors Shannon Pratt and Roger Grabowski address the most controversial issues and problems in estimating the cost of capital. This authoritative book makes a timely and significant contribution to the business valuation body of knowledge and is an essential part of the expert's library.
Download or read book Estimating the Cost of Capital Implied by Market Prices and Accounting Data written by Peter Easton and published by Now Publishers Inc. This book was released on 2009 with total page 148 pages. Available in PDF, EPUB and Kindle. Book excerpt: Estimating the Cost of Capital Implied by Market Prices and Accounting Data focuses on estimating the expected rate of return implied by market prices, summary accounting numbers, and forecasts of earnings and dividends. Estimates of the expected rate of return, often used as proxies for the cost of capital, are obtained by inverting accounting-based valuation models. The author describes accounting-based valuation models and discusses how these models have been used, and how they may be used, to obtain estimates of the cost of capital. The practical appeal of accounting-based valuation models is that they focus on the two variables that are commonly at the heart of valuations carried out by equity analysts -- forecasts of earnings and forecasts of earnings growth. The question at the core of this monograph is -- How can these forecasts be used to obtain an estimate of the cost of capital? The author examines the empirical validity of the estimates based on these forecasts and explores ways to improve these estimates. In addition, this monograph details a method for isolating the effect of any factor of interest (such as cross-listing, fraud, disclosure quality, taxes, analyst following, accounting standards, etc.) on the cost of capital. If you are interested in understanding the academic literature on accounting-based estimates of expected rate of return this monograph is for you. Estimating the Cost of Capital Implied by Market Prices and Accounting Data provides a foundation for a deeper comprehension of this literature and will give a jump start to those who have an interest in these topics. The key ideas are introduced via examples based on actual forecasts, accounting information, and market prices for listed firms, and the numerical examples are based on sound algebraic relations.
Download or read book Cost of Capital written by Shannon P. Pratt and published by John Wiley & Sons. This book was released on 2010-11-04 with total page 794 pages. Available in PDF, EPUB and Kindle. Book excerpt: Praise for Cost of Capital, Fourth Edition "This book is the most incisive and exhaustive treatment of this critical subject to date." —From the Foreword by Stephen P. Lamb, Esq., Partner, Paul, Weiss, Rifkind, Wharton & Garrison LLP, and former vice chancellor, Delaware Court of Chancery "Cost of Capital, Fourth Edition treats both the theory and the practical applications from the view of corporate management and investors. It contains in-depth guidance to assist corporate executives and their staffs in estimating cost of capital like no other book does. This book will serve corporate practitioners as a comprehensive reference book on this challenging topic in these most challenging economic times." —Robert L. Parkinson Jr., Chairman and Chief Executive Office, Baxter International Inc., and former dean, School of Business Administration and Graduate School of Business, Loyola University of Chicago "Shannon Pratt and Roger Grabowski have consolidated information on both the theoretical framework and the practical applications needed by corporate executives and their staffs in estimating cost of capital in these ever-changing economic times. It provides guidance to assist corporate practitioners from the corporate management point of view. For example, the discussions on measuring debt capacity is especially timely in this changing credit market environment. The book serves corporate practitioners as a solid reference." —Franco Baseotto, Executive Vice President, Chief Financial Officer, and Treasurer, Foster Wheeler AG "When computing the cost of capital for a firm, it can be fairly said that for every rule, there are a hundred exceptions. Shannon Pratt and Roger Grabowski should be credited with not only defining the basic rules that govern the computation of the cost of capital, but also a road map to navigate through the hundreds of exceptions. This belongs in every practitioner's collection of must-have valuation books." —Aswath Damodaran, Professor, Stern School of Business, New York University "Pratt and Grabowski have done it again. Just when you thought they couldn't possibly do a better job, they did. Cost of Capital, Fourth Edition is a terrific resource. It is without a doubt the most comprehensive book on this subject today. What really distinguishes this book from other such texts is the fact that it is easy to read—no small feat given the exhaustive and detailed research and complicated subject matter. This book makes you think hard about all the alternative views out there and helps move the valuation profession forward." —James R. Hitchner, CPA/ABV/CFF, ASA, Managing Director, Financial Valuation Advisors; CEO, Valuation Products and Services; Editor in Chief, Financial Valuation and Litigation Expert; and President, Financial Consulting Group "The Fourth Edition of Cost of Capital continues to be a 'one-stop shop' for background and current thinking on the development and uses of rates of return on capital. While it will have an appeal for a wide variety of constituents, it should serve as required reading and as a reference volume for students of finance and practitioners of business valuation. Readers will continue to find the volume to be a solid foundation for continued debate and research on the topic for many years to come." —Anthony V. Aaron, Americas Leader, Quality and Risk Management, Ernst & Young Transaction Advisory Services
Download or read book Estimating the Cost of Equity Capital for a Division of a Firm written by and published by . This book was released on 1989 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Cost of Capital written by Shannon P. Pratt and published by John Wiley & Sons. This book was released on 2010-10-26 with total page 276 pages. Available in PDF, EPUB and Kindle. Book excerpt: Praise for Fourth Edition of Cost of Capital Workbook and Technical Supplement "Pratt and Grabowski went the extra mile to supplement their magnum opus by providing this Workbook and Technical Supplement. As a finance professor for many years, I know from experience that students and teachers really value supplements to textbooks. It allows the teacher to help the student to review and apply what was presented in the text, and the PowerPoints are a great service to teachers in course preparation. The website provides various worksheets that show the inner workings of the models. I enthusiastically recommend the Workbook and Technical Supplement to finance professors and teachers and their students. —Daniel L. McConaughy, PhD, ASA, Professor of Finance, California State University, Northridge, Valuation Services, Crowe Horwath LLP "The Workbook and Technical Supplement provides a detailed tutorial on understanding and executing the theoretical concepts explained in the Fourth Edition. This supplement is three books in one. Part One is a step-by-step tutorial on estimating certain key components of the cost of equity capital. Part Two provides a bridge between the theory and some practical applications, such as estimating the cost of capital for real property. Parts Three and Four allow the readers to test their comprehension of the concepts and identify areas for a review. It is almost as good as having Professors Pratt and Grabowski looking over your shoulder to ensure that one is both comprehending and correctly implementing the complex concepts.." —Ashok Abbott, PhD, Associate Professor of Finance, College of Business & Economics, West Virginia University "This text provides the most comprehensive coverage of cost of capital issues that I have seen to date. Messrs. Pratt and Grabowski have created a very accessible and lucid treatment of what most would consider an opaque subject. The Fourth Edition is especially important for its new topics as well as expanded coverage of concepts from earlier editions. Of particular interest is the review of the extreme market conditions during the 2008–2009 crisis and the effect that the unprecedented volatility had on traditional cost of capital models. For years, Pratt and Grabowski's research has informed the business valuation curriculum of the American Society of Appraisers. This book will be added to our reading list, and thousands of students worldwide will benefit from the state?of?the?art content of the Fourth Edition and the companion Workbook and Technical Supplement. Furthermore, Cost of Capital, Fourth Edition should be a mandatory part of every valuation practitioner's library. If you buy this book, you can expect it to become well worn and remain on your desk within arm's length until the publication of the Fifth Edition." —John Barton, ASA, CPA, Chairman, Business Valuation Committee, ASA "Cost of capital is so much more complex than it used to be. With so many additional considerations regarding each variable of the cost of capital formula, this book is a must for anyone that needs to understand or develop a discount rate. Even the most experienced practitioner will benefit from the outstanding work of Pratt and Grabowski. This book has to become part of your library." —Gary R. Trugman, CPA/ABV, MCBA, ASA, MVS, President, Trugman Valuation Associates, Inc.
Download or read book The Real Cost of Capital written by Tim Ogier and published by Pearson UK. This book was released on 2012-12-27 with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This book is required reading for anyone involved in the practical issues of cost of capital decisions. It is written in a way that engages the novice, and yet challenges the professional to rethink the real issues." Brendan Scholey, Bloomberg. The cost of capital is the fundamental financial tool for business decision-making. It drives measures of value creation and destruction, and forms the basis of financial analysis using cash flow and other frameworks. This book is here to help the business world to use the cost of capital for real. The Real Cost of Capital describes the key issues in understanding and using the cost of capital today, taking principles from the world of managerial finance and putting them into the context of major investment decisions. Should, for example, a company use its own cost of capital to appraise new investments and acquisitions? What cost of capital might a US company use when appraising an investment in, say, the Philippines? For a typical investment, which type of risk is more important – specific risk or systematic risk? How should these risks be reflected in, say, a venture capital situation? Debt is cheaper than equity – so why don’t companies raise more debt than they do? Most practitioners use the weighted average cost of capital ("WACC") in valuation and appraisal – but when should an alternative approach be used? This book will help you find the answers. The Real Cost of Capital is required reading for anyone involved in the practical issues of cost of capital decisions. It brings together the latest academic thinking with practical requirements in a real-life context, and the authors have used their combined experience of advising governments and international blue-chip companies to bring readers up to date with current issues. The Real Cost of Capital includes chapters on choosing models, calculating the cost of capital using real-life data sources, and calculating the cost of capital in an international context (a subject not usually covered in academic texts). It also has chapters and worked examples on the practical application of the cost of capital in business valuations, high-tech situations and the wide range of premia and discounts that can be applied to the cost of capital. The book has an associated website www.costofcapital.net which contains some current links. The site also gives access to tax rate information and financial data relevant to using cost of capital around the world. The objective is to make sure that the corporate planner, student, adviser or decision maker, when she/he is on the road, can simply open the book or dial in and take advantage of a wealth of decision-making support, without the pain of extended academic study.
Download or read book Law and Finance written by Thorsten Beck and published by World Bank Publications. This book was released on 2002 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: New research suggests that cross-country differences in legal origin help explain differences in financial development. This paper empirically assesses two theories of why legal origin influences financial development. First, the political' channel stresses that (i) legal traditions differ in the priority they give to the rights of individual investors vis- ...-vis the state and (ii) this has repercussions for the development of property rights and financial markets. Second, the adaptability' channel holds that (i) legal traditions differ in their ability to adjust to changing commercial circumstances and (ii) legal systems that adapt quickly to minimize the gap between the contracting needs of the economy and the legal system's capabilities will foster financial development more effectively than would more rigid legal traditions. We use historical comparisons and cross-country regressions to assess the validity of these two channels. We find that legal origin matters for financial development because legal traditions differ in their ability to adapt efficiently to evolving economic conditions.
Download or read book Estimating a Firm s Expected Cost of Equity Capital Using Consensus Forecasts written by Holger Daske and published by . This book was released on 2004 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, we propose a technique for estimating a firm's expected cost of equity capital derived from analyst consensus forecasts and stock prices. Building on the work of Gebhardt/Lee/Swaminathan (2001) and Easton/Taylor/Shroff/Sougiannis (2002), our approach allows daily estimation, using only publicly available information at that date. We suggest this technique for application in investment and capital budgeting decisions at the company level. We then estimate the expected cost of equity capital at the market, industry and individual firm level using historical German data from 1989-2002 and examine firm characteristics which are systematically related to these estimates. Finally, we demonstrate the potential practical applicability of the concept in a contemporary case study for DaimlerChrysler and the European automobile industry.
Download or read book Money Capital in the Theory of the Firm written by Douglas Vickers and published by Cambridge University Press. This book was released on 1987-06 with total page 256 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book makes an important contribution to the formation of new and analytically richer perspectives in the important area of economics it addresses.
Download or read book Effects of Corporate Disclosure on a Firm s Cost of Capital written by Markus Bäder and published by GRIN Verlag. This book was released on 2016-05-25 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bachelor Thesis from the year 2015 in the subject Business economics - Investment and Finance, grade: 1.0, accadis Hochschule Bad Homburg, course: Final Thesis, language: English, abstract: The potential relation of increased levels of corporate disclosure on a firm’s cost of capital remains of great importance, both from a research-focussed and business- oriented point-of-view; however, the existence of methodological drawbacks has led to ever more complex studies, which eventually made the literature vast and confusing for outside readers. The purpose of this thesis was to organise and thereby simplify the different perspectives on a dynamic issue. It is argued that, in theory, enhanced transparency levels the marketplace by spreading information more equally among investors. Consequently, the information asymmetry component is mitigated, which translates into lower levels of estimation risk, transaction costs and default risk. After all, theoretical studies provided evidence that increased disclosure lowers the costs of capital. However, since neither of the involved components is directly observable, a myriad of approaches emerged to approximate actual figures. Although most of these proxies follow similar patterns, it is argued that none of the present approaches is free from constraints, which, in turn, affects the reliability of existing empirical studies. Research, after all, still lacks a generally accepted and holistic approach to the present day. In this context, one of the most recent findings provides a new and rather praxis-oriented perspective, by arguing that firms and investors are merely interested in a good-practice level of disclosure. Regardless of the perspective, an ultimate conclusion has yet to be revealed by the literature and it seems illusory that academics and practitioners agree on one approach in the future. Nevertheless, the contribution of this thesis was merely to structure and simplify the current state of a dynamic issue. The author therefore used easy to understand graphics and tables and linked the findings to related fields of research, where necessary.
Download or read book Cost of Capital Website written by Shannon P. Pratt and published by John Wiley & Sons. This book was released on 2014-04-21 with total page 1344 pages. Available in PDF, EPUB and Kindle. Book excerpt: A one-stop shop for background and current thinking on the development and uses of rates of return on capital Completely revised for this highly anticipated fifth edition, Cost of Capital contains expanded materials on estimating the basic building blocks of the cost of equity capital, the risk-free rate, and equity risk premium. There is also discussion of the volatility created by the financial crisis in 2008, the subsequent recession and uncertain recovery, and how those events have fundamentally changed how we need to interpret the inputs to the models we use to develop these estimates. The book includes new case studies providing comprehensive discussion of cost of capital estimates for valuing a business and damages calculations for small and medium-sized businesses, cross-referenced to the chapters covering the theory and data. Addresses equity risk premium and the risk-free rate, including the impact of Federal Reserve actions Explores how to use Morningstar's Ibbotson and Duff Phelps Risk Premium Report data Discusses the global cost of capital estimation, including a new size study of European countries Cost of Capital, Fifth Edition puts an emphasis on practical application. To that end, this updated edition provides readers with exclusive access to a companion website filled with supplementary materials, allowing you to continue to learn in a hands-on fashion long after closing the book.
Download or read book Cost of Capital in Litigation written by Shannon P. Pratt and published by John Wiley & Sons. This book was released on 2010-10-26 with total page 323 pages. Available in PDF, EPUB and Kindle. Book excerpt: Cost of Capital in Litigation addresses cost of capital issues in litigation and discusses major decisions, highlighting how to avoid errors that have often been made by experts. The book helps the attorney and valuation expert understand the decisions within the context of the theory of cost of capital and includes a chapter on cross-examining experts on cost of capital issues. Throughout, there are citation to relevant material and cross-reference to Cost of Capital: Applications and Examples, Fourth Edition.
Download or read book Estimating beta and Cost of Equity Capital for Non traded Transportation Companies written by Sascha Heller and published by diplom.de. This book was released on 2014-04-11 with total page 71 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inhaltsangabe:Introduction: Estimating the cost of equity capital has two major implications. First, it reflects the return to a company s stock which an equity investor expects to receive from his investment. He makes his decision upon whether he could earn a higher rate of return in an alternative investment of equivalent risk. Second, a company must earn the cost of capital (both debt and equity) through its undertaken projects. It is hence relevant for decisions on undertaking positive net present value projects which are of similar risk as the company s average business activities. It also substantially influences the pricing of an entire firm as far as the valuation is based on a discounted cash flow model. A lot of effort has been done in the past to achieve accurate models which precisely determine this cost. Building on the modern portfolio theory of Harry Markowitz, a widely used and commonly known model in this context is the Capital Asset Pricing Model (CAPM). Introduced by several researchers in the 1960s, it is still one of the most applied methods for practitioners. However, it suffers from several shortcomings, including statistical caveats, economic assumptions, the absence of market frictions and the behaviour of market participants. An upgrade to this model was provided by Stephen Ross which has resulted in the Arbitrage Pricing Theory (APT). It combines several risk factors in addition to one market proxy, as it is the case in the CAPM, and is less restrictive in its assumptions. But both CAPM and APT require observable market data, i.e. stock prices, of the analysed companies. These models thus only work for publicly listed firms. If research should be done on non-traded companies, however, an alternative methodology must be applied. In general, data from the balance sheet, the income statement and the cash flow statement are available for both listed and non-listed companies. While accounting data have widely been used in the past as well and have been assumed to provide valuable information in explaining stock returns, this line of research has dissipated over time. Only a few key figures, such as size and financial leverage, are still considered to be relevant. However, they can be used to indirectly estimate a firm s beta by assessing their explanatory power in a CAPM or APT framework. This methodology is particularly beneficial for firms which are not listed because there cannot be observed any stock price movements. [...]
Download or read book Equity Asset Valuation written by Jerald E. Pinto and published by John Wiley & Sons. This book was released on 2015-10-20 with total page 622 pages. Available in PDF, EPUB and Kindle. Book excerpt: Navigate equity investments and asset valuation with confidence Equity Asset Valuation, Third Edition blends theory and practice to paint an accurate, informative picture of the equity asset world. The most comprehensive resource on the market, this text supplements your studies for the third step in the three-level CFA certification program by integrating both accounting and finance concepts to explore a collection of valuation models and challenge you to determine which models are most appropriate for certain companies and circumstances. Detailed learning outcome statements help you navigate your way through the content, which covers a wide range of topics, including how an analyst approaches the equity valuation process, the basic DDM, the derivation of the required rate of return within the context of Markowitz and Sharpe's modern portfolio theory, and more. Equity investments encompass the buying and holding of shares of stock in the anticipation of collecting income from dividends and capital gains. Determining which shares will be profitable is key, and an array of valuation techniques is applied on today's market to decide which stocks are ripe for investment and which are best left out of your portfolio. Access the most comprehensive equity asset valuation text on the market Leverage detailed learning outcome statements that focus your attention on key concepts, and guide you in applying the material accurately and effectively Explore a wide range of essential topics, such as the free cash flow approach, valuation using Graham and Dodd type concepts of earning power, associated market multiples, and residual income models Improve your study efforts by leveraging the text during your CFA certification program prep Equity Asset Valuation, Third Edition is a comprehensive, updated text that guides you through the information you need to know to fully understand the general analysis of equity investments.
Download or read book Estimating SMEs Cost of Equity Using a Value at Risk Approach written by F. Beltrame and published by Springer. This book was released on 2014-06-10 with total page 228 pages. Available in PDF, EPUB and Kindle. Book excerpt: As well as reviewing traditional models, this book proposes an alternative model for estimating the cost of risk capital. This model, known as CaRM (Capital at Risk Model), bases the cost estimate of risk capital on VaR (Value at Risk) for the very first time. This book is an ideal resource for developing valuation research in SMEs.
