COST OF CAPITAL ESTIMATION FOR MAJOR CORPORATIONS. EVIDENCE ON BEST PRACTICE

Angela-Maria Filip, Daniela Georgeta Beju, Maria-Miruna Pochea and Maria Ciupac-Ulici
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Angela-Maria Filip: “Babeş-Bolyai” University of Cluj-Napoca
Daniela Georgeta Beju: “Babeş-Bolyai” University of Cluj-Napoca
Maria-Miruna Pochea: “Babeş-Bolyai” University of Cluj-Napoca

Theoretical and Applied Economics, 2011, vol. 5(558)(supplement), issue 5(558)(supplement), 273-277

Abstract: This paper presents the theoretical background concerning capital budgeting techniques and cost of capital estimation and a literature review on cost of capital estimation practice applied by key European corporations as opposed to Asian and American firms. Previous studies showed that the most commonly used model for estimating the cost of equity is the CAPM with major differences concerning the choice of variables. This broad estimating divergence has major implications on the decision making process and capital budgeting techniques.

Keywords: cost of equity; capital budgeting; WACC; discount rate; DCF methods. (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:agr:journl:v:5(558)(supplement):y:2011:i:5(558)(supplement):p:273-277

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