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An analytical and empirical comparison of alternative cost of equity capital estimation methods

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Published by College of Commerce and Business Administration, University of Illinois at Urbana-Champaign in [Urbana, Ill.] .
Written in English


Book details:

Edition Notes

Includes bibliographical references (p. 17-18).

StatementCheng F. Lee, Charles M. Linke, J. Kenton Zumwalt
SeriesBEBR faculty working paper -- no. 953, BEBR faculty working paper -- no. 953.
ContributionsLinke, Charles M., Zumwalt, J. Kenton, University of Illinois at Urbana-Champaign. College of Commerce and Business Administration
The Physical Object
Pagination18, [7] p. ;
Number of Pages18
ID Numbers
Open LibraryOL25104741M
OCLC/WorldCa757397714

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b.u \\a£A^y\£ FACULTYWORKING PAPERNO AnAnalyticalandEmpiricalComparisonofAlternative CostofEquityCapitalEstimationMethods J.   4. The CAPM and project cost of capital: empirical analysis. For our empirical analysis, we conduct monthly Fama and MacBeth () cross-sectional regressions at the individual stock level with the Newey and West () correction using a lag of Each month, we regress monthly stock excess return (over the risk-free rate) on betas and stock Cited by: The purpose of this article is to look for the suitable model for estimating the cost of equity capital in the Tunisian stock market, using a sample of 26 Tunisian listed firms over the period. Cost of Equity is the rate of return a company pays out to equity investors. A firm uses cost of equity to assess the relative attractiveness of investments, including both internal projects and external acquisition opportunities. Companies typically use a combination of equity and debt financing, with equity capital being more expensive.

  The cost of capital is the total cost of raising capital, taking into account both the cost of equity and the cost of debt. A stable, well-performing company, will generally have a lower cost of. Current state-of-the-art methods of estimating the cost of equity capital, We find that during the period in Germany the average expected cost of equity capital under estimation method I (II) is 10% (%), and the average expected market the findings of our empirical analysis of the expected cost of equity capital and its deter-. a specifically developed program and obtain a unique dataset of cost of equity values, estimation methods and parameters used by valuation experts in the Czech Republic in the period between and Our findings suggest that the most popular model for cost of equity estimation is CAPM, which is followed by the heuristic build up model. Overview of Cost of Capital. Average Earnings Yield Versus Current Earnings Yield Method. Discounting Cash-Flow Method. Weighted-Average Cost of Capital. Theoretical Justification of the WACC. The CAPM Method. M&M's Cross-Sectional Method. The Cost of Capital. Regression Formulation and Empirical Results. Chase Cost of Capital. Summary and.

Equity Valuation Methods. Valuation methods are the methods to value a business/company which is the primary task of every financial analyst and there are five methods for valuing company which are Discounted cash flow which is present value of future cash flows, comparable company analysis, comparable transaction comps, asset valuation which is fair value of assets and sum of parts where.   Equity charge is simply a firm's total equity capital multiplied by the required rate of return of that equity, and can be estimated using the capital . Return on equity Return on capital Debt Equity (Return on capital After-tax cost of debt) =+ ×− FIRM VALUATION: COST OF CAPITAL AND ADJUSTED PRESENT VALUE APPROACHES. TABLE Free Cash Flows to the Firm: Comparison to Other Measures. Cash Flow Used Definition Use in Valuation. FCFF Free cash flow to firm Discounting free cash. The goal of the empirical survey was to determine the present application of quantitative capital budgeting methods, cost of capital and cash flow estimation, risk analysis and application of a.