Practical approach to estimating cost of capital

Domantas Skardziukas

MPRA Paper from University Library of Munich, Germany

Abstract: The recent as well as precedent market crashes has increased a number of already existing biases when estimating a forward looking cost of capital for company’s stakeholders. With cost of capital being essential in corporate valuation and decision making the following paper analyzes the research carried out by numerous academics up to date and provides a comprehensive overview on the appropriate choices of inputs and methods for estimating cost of capital. The paper draws the necessary attention to the times of crises. An additional study shows how different preferences can result in variation in cost of equity capital and terminal value of a company.

Keywords: corporate finance; valuation; cost of capital; beta; recession; credit crunch; cost of equity (search for similar items in EconPapers)
JEL-codes: G0 G01 G1 G3 (search for similar items in EconPapers)
Date: 2010-10-01
New Economics Papers: this item is included in nep-acc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://mpra.ub.uni-muenchen.de/31325/1/MPRA_paper_31325.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:31011

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