Capital Allocation in Financial Firms
This paper develops a theory of capital allocation in financial intermediaries where the cost of "risk capital" is a critical consideration. The implication for capital budgeting is that financial firms should use a modified NPV rule in which projects are valued by calculating the NPV of cash flows using marketdetermined discount rates and then subtracting a deadweight cost of capital that reflects the project's marginal contribution to firm-wide risk. 2005 Morgan Stanley.
Year of publication: |
2005
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Authors: | Perold, André F. |
Published in: |
Journal of Applied Corporate Finance. - Morgan Stanley, ISSN 1078-1196. - Vol. 17.2005, 3, p. 110-118
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Publisher: |
Morgan Stanley |
Saved in:
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