AccessMyLibrary provides FREE access to over 30 million articles from top publications available through your library.
Create a link to this page
Copy and paste this link tag into your Web page or blog:
Briefing - Corporate finance - The cost of capital in the real world of business.
(From Financial Director)
A new book written exclusively on the subject of the cost of capital serves as an insightful and practical guide to the issues surrounding investment appraisal, business valuations and capital structure. This briefing highlights some of the issues addressed by the book.
Three experts from accountants PricewaterhouseCoopers have written a book, The Real Cost of Capital: A business field guide to better financial decisions (FT Prentice Hall), which addresses the conventional theory underpinning the cost of capital as well as specific real-life issues.
The book is designed to help readers answer seven questions:
- Should a company use its own cost of capital to appraise new investments and acquisitions? For example, what cost of capital should a US-regulated utility use when considering an acquisition in the construction or transport sectors? What if it can fund this acquisition by borrowing at a cheap rate?
- What cost of capital should a US company use when appraising an investment in, say, the Philippines? What kind of risks should you be reflecting in the discount rate in international valuation and which are in cash flows? Which emerging markets deserve a higher discount rate and why?
- For a typical investment, which type of risk is more important - specific risk or systematic risk? How should these risks be reflected in, say, a venture capital situation?
- New discount rate determinations: a reply.
- Magazine article from: Journal of Forensic Economics Haydon, Randall B. Webb, Samuel C. March 22, 1997 700+ words
...important and complex subject of net discount rate determination in forensic economics...describe the upward movement of the net discount rate ([k.sub.t] - [g.sub.t...trend line to be used to forecast a net discount rate for calculation of present values of...
- Reserve Banks, the Discount Rate Recommendation, and FOMC Policy.
- Magazine article from: Southern Economic Journal B. Tootell, Geoffrey M. April 1, 2000 700+ words
...directors recommend changes in the discount rate, although the Board of Governors decides...presidents are strongly correlated with the discount rate recommendation of their bank's board...they do recommend changes in the discount rate to the Board of Governors of the Federal...
- An examination of stock price reactions to discount rate changes under...
- Magazine article from: Quarterly Journal of Business and Economics Jensen, Gerald R. Johnson, Robert R. March 22, 1993 700+ words
...from market participants. The Fed discount rate often is interpreted as a signal of...A market reaction should accompany discount rate change announcements if the rate changes...reaction of financial markets to Fed discount rate changes, and the findings have been...
- The response of market interest rates to discount rate changes.
- Magazine article from: Federal Reserve Bank of St. Louis Review Dueker, Michael J. July 1, 1992 700+ words
IT IS WELL-ESTABLISHED that discount rate changes of the same size can have markedly...Thornton (1982), have generally divided discount rate changes into two groups: "technical...changes, those made solely to keep the discount rate in line with market rates, and other...
- Why do T-bill rates react to discount rate changes? (treasury bill rates)
- Magazine article from: Journal of Money, Credit & Banking Thornton, Daniel L. November 1, 1994 700+ words
...exaggerated importance to change of the discount rate. --Benjamin Strong, Testimony to...funds rate indirectly by "using the discount rate and borrowed reserve targets." Recently...argued that nontechnical changes in the discount rate (that is, changes made for reasons...
- A further examination regarding the stability of the net discount rate.
- Magazine article from: Journal of Forensic Economics Sen, Amit Gelles, Gregory M. Johnson, Walter D. January 1, 2000 700+ words
I. Introduction The net discount rate, measured as the average difference...correct value to use for the net discount rate has, in recent years, been...calculation of the average net discount rate over time using the return on...
- FEDERAL RESERVE BOARD CUTS DISCOUNT RATE TO 6.5 PERCENT
- Newspaper article from: The Journal Record MARTIN CRUTSINGER, AP April 19, 1986 700+ words
...Federal Reserve Board is cutting its discount rate to 6.5 percent, the lowest level...time in six weeks the Fed has cut its discount rate, the interest it charges to make loans...financial institutions. A cut in the discount rate is the most dramatic signal the central...
- The time series behavior of the medical cost net discount rate: implications...
- Magazine article from: Journal of Forensic Economics Ewing, Bradley T. Payne, James E. Piette, Michael J. January 1, 2001 700+ words
...increases in medical costs and the discount rate. However, this method is only...medical costs just equals the discount rate. Thus, the economist must...medical cost inflation, the discount rate, or both. A task of this type...