Completely revised for this highly anticipated fifth edition, Cost of Capital contains expanded materials on estimating the basic building blocks of the cost of equity capital, the risk-free rate, and equity risk premium. There is also discussion of the volatility created by the financial crisis in 2008, the subsequent recession and uncertain recovery, and how those events have fundamentally changed how we need to interpret the inputs to the models we use to develop these estimates.
The book includes new case studies providing comprehensive discussion of cost of capital estimates for valuing a business and damages calculations for small and medium-sized businesses, cross-referenced to the chapters covering the theory and data.
- Addresses equity risk premium and the risk-free rate, including the impact of Federal Reserve actions
- Explores how to use Morningstar's Ibbotson and Duff Phelps Risk Premium Report data
- Discusses the global cost of capital estimation, including a new size study of European countries
Cost of Capital, Fifth Edition puts an emphasis on practical application. To that end, this updated edition provides readers with exclusive access to a companion website filled with supplementary materials, allowing you to continue to learn in a hands-on fashion long after closing the book.
Keywords: Shannon Pratt; Roger J. Grabowski; cost of capital; capital asset pricing model; average net income; equity premium; fair value measurements; invested capital model; current liabilities; equity component; debt component; financial spreadsheet model; creating shareholder value; business valuations; financial valuation; country credit rating; direct capitalization method; transaction date; time horizon risk; current share price; prepackaged software; business combinations; ticker symbol; global evidence; sum beta method; mean income return component; capitalized economic income method; risky net cash flows; valuing intangible assets; the real cost of capital; business appraisers; corporate finance and tax officers; and CPAs; cost of capital; SFAS 141; 142 and 144