Recalculating The Cost of Capital  

Oleh:

[s.n]

Jenis: Article from Bulletin/Magazine - ilmiah internasional
Dalam koleksi: Sloan: Management Review vol. 43 no. 2 (2002), page 13.
Topik: capital; recalculating; cost of capital

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Perpustakaan Pusat (Semanggi) Nomor Panggil: SS27 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

Project valuation is a notoriously imprecise art. "Two of the ubiquitous tools in capital budgeting are a wing and a prayer," economists Eugene Fama and Kenneth French once famously observed. But by using a new method for calculating the cost of equity capital, financial managers can put valuation decisions on more solid ground. That's the central claim of a June 2001 article in the Journal of Accounting Research. As co - author Charles M. C. Lee explains, many common methods for calculating the cost of equity, including the venerable capital - asset - pricing model (CAPM), share a significant flaw. The underlying theory focuses on expected returns, an imprecise measure. CAPM, for example, predicts the cost of equity as a function of beta - the relationship between the return that investors expect from a company and the return they expect from the market as a whole.

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