Knowledge about the magnitude of the cost of capital invested in an asset and its determinants is essential for the analysis of corporate investment decisions and for assessing profitability. This book provides a clear conceptual understanding of the cost of capital, the characteristics of an asset that influence it, and a critical, comprehensive, and up-to-date evaluation of practical means for estimating its magnitude. It is intended primarily for use by professional managers, but will also be valuable to future managers in advanced capital budgeting courses.
The focus of the discussion is on estimation methods that are theoretically sound and consistent with a corporate goal of value creation. Three methods are analyzed in depth: the discounted cash flow model, the capital asset pricing model, and arbitrage pricing theory. For each method, the basic theory is set out in a nontechnical manner and empirical evidence in support of the model is critically reviewed. The bulk of the discussion then focuses on practical means for implementing the methods for decision-making purposes. Later chapters focus on the effects of the debt-supporting characteristics of assets, on the valuation of options embedded in securities, and on the estimation of the cost of capital for evaluating international investments. The final chapter discusses certain aspects of the use of cost of capital in public utility regulation. Care is taken to separate out key issues from more peripheral material through a comprehensive set of supplementary notes.
- 342 pages
- English
- PDF
- Available on iOS & Android
eBook - PDF
Table of contents
- Contents
- Figures and Tables
- Preface
- Chapter 1. The Concept and Uses of the Cost of Capital
- Chapter 2. Theoretical Models for Estimating the Cost of Equity Capital
- Chapter 3. Empirical Evidence on Validity of DCF Model and CAPM
- Chapter 4. Estimation of the Cost of Equity Using the DCF Model
- Chapter 5. Estimation of the Cost of Equity Using the CAPM
- Chapter 6. Arbitrage Pricing and Other Models for Estimating the Cost of Equity
- Chapter 7. Financing Effects and the Weighted Average Cost of Capital
- Chapter 8. Multi-Period Issues in Applications of WACC Estimates
- Chapter 9. Estimating the Cost of Capital for Non-Traded Assets
- Chapter 10. The Cost of Capital for International Investments
- Chapter 11. Option Pricing Theory and the Cost of Capital
- Chapter 12. The Cost of Capital in Public Utility Regulation
- Glossary of Notation and Abbreviations
- Author Index
- Subject Index
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Yes, you can access The Cost of Capital by Cleveland S. Patterson in PDF and/or ePUB format, as well as other popular books in Business & Business General. We have over 1.5 million books available in our catalogue for you to explore.