UID:
almafu_9960119341402883
Format:
1 online resource (xv, 353 pages) :
,
digital, PDF file(s).
Edition:
1st ed.
ISBN:
1-139-17133-X
Content:
This book provides an answer to the question, 'What does the finance and economics literature say about the determination and estimation of a project's cost of capital?'. Uniquely, it reviews both the theory of asset pricing in discrete time and a range of more applied topics which relate to project valuation, including the effects of corporate and personal taxes, the international dimension, estimation of the cost of equity in practice, and the cost of capital for regulated utilities. It seeks to explain models and arguments in a way which does justice to the reasoning, whilst minimising the prior knowledge of finance and maths expected of the reader. It acts as a bridge between a general undergraduate or MBA text in finance, accounting or economics, and the modern theoretical literature on the cost of capital.
Note:
Title from publisher's bibliographic system (viewed on 05 Oct 2015).
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Cover -- Half-title -- Title -- Copyright -- Contents -- List of figures -- List of tables -- Preface -- Part I Expected Returns on Financial Assets -- The cost of capital under certainty -- 1.1 Concepts -- 1.2 The interest rate under certainty -- 1.3 Summary -- Allowing for uncertainty: contingent states -- 2.1 Valuation -- 2.2 Expected utility -- 2.3 Choice and asset prices -- 2.4 Some comments -- 2.5 Summary -- The capital asset pricing model and multifactor models -- 3.1 The capital asset pricing model -- 3.2 Multifactor models -- 3.3 Note on conditional models -- 3.4 Evidence -- 3.5 Summary -- Appendix 3.1: Choice of risky portfolio -- Appendix 3.2: The expected return on an asset in an efficient portfolio -- The consumption-based model -- 4.1 The stochastic discount factor -- 4.2 The consumption CAPM -- 4.3 Multiperiod setting -- 4.4 Note on evidence -- 4.5 Summary -- The equity risk premium -- 5.1 Use of a historic mean premium as a forecast -- 5.2 Evidence on historic premiums -- 5.3 Ex ante expectations -- 5.4 Predictions from consumption-based theory -- 5.5 Summary -- Part II A Project's Cost of Capital -- Project valuation -- 6.1 The valuation model -- 6.2 Capital: equity and debt -- 6.3 Financing and taxes -- 6.4 Ex ante determinants of project beta -- 6.5 Notes on the user cost of capital and investment -- 6.6 Summary -- Appendix 6.1: The Myers-Turnbull model -- Corporation tax, leverage and the weighted average cost of capital -- 7.1 Preliminaries -- 7.2 The weighted average cost of capital -- 7.3 Expected cash flows that are not a constant perpetuity -- 7.4 Use of the formulas -- 7.5 Issues concerning the WACC -- 7.6 Summary -- Personal tax and the cost of equity: the old and the new views -- 8.1 Extension of the Modigliani-Miller analysis -- 8.2 The 'new view': the cost of equity and the source of equity -- 8.3 Evidence.
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8.4 Summary -- Appendix 8.1: Personal tax and the CAPM -- Appendix 8.2: The Stiglitz model -- Personal tax, leverage and multiple tax rates -- 9.1 Leverage allowing for personal tax -- 9.2 The cost of capital under the before- and after-tax views -- 9.3 Imputation systems -- 9.4 A certainty-equivalent approach -- 9.5 Evidence on leverage and tax -- 9.6 Asset pricing with multiple personal tax rates -- 9.7 Summary -- Inflation and risk premiums -- 10.1 Relations between real and nominal rates of return -- 10.2 Inflation and effective rates of tax on real returns -- 10.3 Risk premiums -- 10.4 Summary -- The international dimension -- 11.1 The cost of equity -- 11.2 The cost of equity for a foreign project -- 11.3 Summary -- Appendix 11.1: Errunza and Losq's model -- Appendix 11.2: Testing the conditional CAPM -- Part III Estimating the Cost of Capital -- The cost of equity: inference from present value -- 12.1 Estimation of the cost of equity in practice -- 12.2 The dividend discount model -- 12.3 The abnormal earnings method -- 12.4 Inference from options prices -- 12.5 Summary -- The cost of equity: applying the CAPM and multifactor models -- 13.1 Choice of risk-free rate -- 13.2 Choice of equity premium -- 13.3 Estimating beta from historic data -- 13.4 A Bayesian approach to estimating the CAPM -- 13.5 Multifactor models -- 13.6 Summary -- Estimating a project's cost of capital -- 14.1 Estimating a project's cost of equity -- 14.2 Estimating a project's WACC -- 14.3 Evidence regarding practice -- 14.4 Estimation: what matters and what does not matter -- 14.5 The relation between theory and practice -- 14.6 Summary -- Regulated utilities -- 15.1 Price setting in the United States -- 15.2 Estimation of the cost of equity -- 15.3 Regulatory policy, risk and the allowed rate of return -- 15.4 Price setting in the United Kingdom.
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15.5 A note on public/private projects -- 15.6 Summary -- References -- Index.
,
English
Additional Edition:
ISBN 0-521-00044-0
Additional Edition:
ISBN 0-521-80195-8
Language:
English
URL:
https://doi.org/10.1017/CBO9781139171335
