Cost of Capital, 3rd Edition

by Shannon P. Pratt (Willamette Management Associates, Portland, Oregon); Roger J. Grabowski

• ISBN13: 9780470223710
• ISBN10: 0470223715
• Format: eBook
• Copyright: 2008-02-01
• Publisher: Wiley

Summary

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.

Table of Contents

About the Authors

Acknowledgments

Introduction

Notation

Cost of Capital Basics

Defining Cost of Capital

Introduction to Cost of Capital Applications: Valuation and Project Selection

Net cash flow: The Preferred Measure of Return

Discounting versus Capitalizing

Relationship between Risk and Cost of Capital

Cost Components of a Company's Capital Structure

Weighted Average or Overall Cost of Capital

Iterative Process Using CAPM to Calculate the Cost of Equity component of the Weighted Average Cost of Capital - Constant Capital Structure

Iterative process using CAPM to calculate the cost of Equity component of the weighted average cost of capital - changing capital structure

Estimating the Cost of Equity Capital "As If Publicly Traded"

Equity Risk Premium

Appendix

Build-up models

Capital Asset Pricing Model (CAPM)

Proper Use of Beta

Criticisms of CAPM and Beta versus Other Risk Measures

Size Effect

Criticisms of Size Effect

Appendix

D&P Risk Study

Alternative models to the Build-Up and CAPM models Fama-French, APT, Market derived capital pricing mod

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