Revenge of the Betas: A Bonus Chapter for Insomniacs

Christophe Thibierge and Andrew Beresford
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Christophe Thibierge: ESCP Europe
Andrew Beresford: ESCP Europe

Chapter 6¾ in A Practical Guide to Corporate Finance, 2015, pp 195-211 from Palgrave Macmillan

Abstract: Abstract The concept of beta has been used extensively in the last two chapters. We first presented this risk metric in Chapter 5 from a stock market perspective: a stock’s beta is a measure of its volatility. But we very quickly started using it to determine discount rates (expected returns). At the end of Chapter 5, we looked at a company’s financial policy and its impact on the cost of financing. Finally, in Chapter 6 we used beta in the CAPM formula to value Blue Steel Co. To spare the reader’s flagging neurons we did not take it any further at that time. But there is indeed more to say on the matter—and that is what we are going to do in this bonus chapter.

Keywords: Risk Premium; Capital Structure; Investment Project; Economic Context; Debt Level (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-49254-8_8

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DOI: 10.1057/9781137492548_8

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