Practical approach to estimating cost of capital

Skardziukas, Domantas (2010): Practical approach to estimating cost of capital.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: corporate finance, valuation, cost of capital, beta, recession, credit crunch, cost of equity
• Subjects: G - Financial Economics > G1 - General Financial Markets; G - Financial Economics > G3 - Corporate Finance and Governance; G - Financial Economics > G0 - General; G - Financial Economics > G0 - General > G01 - Financial Crises

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