About this product

Product Identifiers

PublisherWiley & Sons, Incorporated, John

ISBN-100471224014

ISBN-139780471224013

eBay Product ID (ePID)2317541

Product Key Features

Number of Pages352 Pages

Publication NameCost of Capital : Estimation and Applications

LanguageEnglish

Publication Year2002

SubjectAccounting / General, Corporate Finance / Valuation, Investments & Securities / General

FeaturesRevised

TypeTextbook

AuthorShannon P. Pratt

Subject AreaBusiness & Economics

FormatHardcover

Dimensions

Item Height1.2 in

Item Weight23.1 Oz

Item Length9.6 in

Item Width6.2 in

Additional Product Features

Edition Number2

Intended AudienceScholarly & Professional

LCCN2002-009954

Dewey Edition21

IllustratedYes

Dewey Decimal658.152

Edition DescriptionRevised edition

Table Of ContentList of Exhibits. Foreword. Preface. Acknowledgments. Introduction. Notation System Used in This Book. Part I: Cost of Capital Basics. 1. Defining Cost of Capital. Components of a Companys Capital Structure. Cost of Capital Is a Function of the Investment. Cost of Capital Is Forward Looking. Cost of Capital Is Based on Market Value, Not Book Value. Cost of Capital Is Usually Stated in Nominal Terms. Cost of Capital Equals Discount Rate. Discount Rate Is Not the Same as Capitalization Rate. Summary. 2. Introduction to Cost of Capital Applications: Valuation and Project Selection. Net Cash Flow Is the Preferred Economic Income Measure. Cost of Capital Is the Proper Discount Rate. Present Value Formula. Example: Valuing a Bond. Relationship of Discount Rate to Capitalization Rate. Applications to Businesses, Business Interests, Projects, and Divisions. Summary. 3. Net Cash Flow: The Preferred Measure of Return. Defining Net Cash Flow.Net Cash Flows Should Be Probability-Weighted Expected Values. Why Net Cash Flow Is the Preferred Measure of Economic Income. Summary. 4. Discounting versus Capitalizing. Capitalization Formula. Example: Valuing a Preferred Stock. Functional Relationship between Discount Rate and Capitalization Rate. Major Difference between Discounting and Capitalizing 25 Gordon Growth Model 25 Combining Discounting and Capitalizing (Two-stage Model). Equivalency of Discounting and Capitalizing Models. Midyear Convention. Converting from After-tax Rate to Pretax Rate. Summary. 5. Relationship between Risk and the Cost of Capital. Defining Risk. Types of Risk. How Risk Impacts the Cost of Capital. Cost of Equity Capital. Cost of Conventional Debt and Preferred Equity Capital. Cost of Overall Invested Capital. Summary. 6. Cost Components of a Companys Capital Structure. Debt. Preferred Equity. Convertible Debt or Preferred Stock. Common Stock or Partnership Interests. Summary. 7. Weighted Average Cost of Capital. When to Use Weighted Average Cost of Capital. Weighted Average Cost of Capital Formula. Computing WACC for a Public Company. Computing WACC for a Private Company. Should an Actual or a Hypothetical Capital Structure Be Used? Summary.Part II: Estimating the Cost of Equity Capital. 8. Build-up Models. Formula for the Equity Cost of Capital Build-up Model. Risk-free Rate. Equity Risk Premium. Small Stock Premium. Company-specific Risk Premium. Example of a Build-up Model. Summary. 9. Capital Asset Pricing Model. Concept of Systematic Risk. Background of the Capital Asset Pricing Model. Systematic and Unsystematic Risk. Using Beta to Estimate Expected Rate of Return. Expanding CAPM to Incorporate Size Premium and Specific Risk. Expanded CAPM Cost of Capital Formula. Assumptions Underlying the Capital Asset Pricing Model. Recent Research on the Equity Risk Premium. Summary. 10. Proper Use of Betas. Estimation of Beta. Differences in Estimation of Beta. Levered and Unlevered Betas. Modified Betas: Shrunk and Lagged. Summary. 11. Size Effect. Ibbotson Associates Studies. Standard & Poors Corporate Value Consulting Studies (formerly the PricewaterhouseCoopers Studies). Extension of Data to Smaller Size Categories: Results from the Pratts Stats? Database. Summary. 12. DCF Method of Estimating Cost of Capital. Theory of the DCF Method. Mechanics of the DCF Method. Single-stage DCF Model. Multistage DCF Models. Sources of Information. Summary.13. Using Ibbotson Associates Cost of Capital Data (Michael W. Barad and Tara McDowell).<

SynopsisAn authoritative text on cost of capital for both the nonprofessional and the valuation expert -- now revised and expanded In endeavoring to practice sound corporate finance, there is perhaps nothing so critical, nor slippery, as cost of capital estimation. The second edition of Cost of Capital: Estimation and Applications combines a state-of-the-art treatise on cost of capital estimation with an accessible introduction for the nonprofessional. This comprehensive yet usable guide begins with an exposition of basic concepts understandable to the lay person and proceeds gradually from simple applications to the more complex procedures commonly found in the marketplace. New features of the revised and expanded Second Edition include chapters on Economic Value Added (EVA) and reconciling cost of capital in the income approach with valuation multiples in the market approach, as well as expanded coverage of cost of capital in the courts and handling discounts for marketability. Cost of Capital remains an incomparable resource for all parties interested in effective business valuation., An authoritative text on cost of capital for both the nonprofessional and the valuation expert-now revised and expandedIn endeavoring to practice sound corporate finance, there is perhaps nothing so critical, nor slippery, as cost of capital estimation. The second edition of Cost of Capital: Estimation and Applications combines a state-of-the-art treatise on cost of capital estimation with an accessible introduction for the nonprofessional.This comprehensive yet usable guide begins with an exposition of basic concepts understandable to the lay person and proceeds gradually from simple applications to the more complex procedures commonly found in the marketplace. New features of the revised and expanded Second Edition include chapters on Economic Value Added (EVA) and reconciling cost of capital in the income approach with valuation multiples in the market approach, as well as expanded coverage of cost of capital in the courts and handling discounts for marketability. Cost of Capital remains an incomparable resource for all parties interested in effective business valuation.

LC Classification NumberHG4028.C4P72 2002