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Capital Budgeting in Arbitrage-Free Markets
Laitenberger, Jörg; Löffler, Andreas - 2002
In capital budgeting problems future cash flows are discounted using the expected one period returns of the investment. In this paper we establish a theory that relates this approach to the assumption that markets are free of arbitrage. Our goal is to uncover implicit assumptions on the set of...
Persistent link: https://www.econbiz.de/10010317610
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Marginal versus average beta of equity under corporate taxation
Lund, Diderik - 2009
Even for fully equity-financed firms there may be substantial effects of taxation on the after-tax cost of capital. Among the few studies of these effects, even fewer identify all effects correctly. When marginal investment is taxed together with inframarginal, marginal beta differs from average...
Persistent link: https://www.econbiz.de/10010285573
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Yes, we should discount the far-distant future at its lowest possible rate: a resolution of the Weitzman-Gollier puzzle
Freeman, Mark C. - 2009
In this paper the author proves that the Expected Net Future Value (ENFV) criterion can lead a risk neutral social planner to reject projects that increase expected utility. By contrast, the Expected Net Present Value (ENPV) rule correctly identifies the economic value of the project. While the...
Persistent link: https://www.econbiz.de/10010299168
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The Economic Opportunity Cost of Capital for Canada - An Empirical Update
Jenkins, Glenn; Kuo, Chun-Yan - 2007
The social or economic discount rate is the threshold rate used to calculate the net present value of an investment project, a program, or a regulatory intervention to see whether the proposed expenditures are economically worthwhile to undertake. The size of the economic rate of discount has...
Persistent link: https://www.econbiz.de/10011940747
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A look at the actual cost of capital of US firms
Moore, David J. - In: Cogent Economics & Finance 4 (2016) 1, pp. 1-15
as the weighted average cost of capital (WACC) equity component. This study introduces two new costs of equity measures … to address CAPM criticisms and provide new perspective on WACC estimates. The firm-based measure focuses on firm …-based WACC measures, along with the traditional CAPM-based WACC measure, to a broad sector-based cross section from 1972 to 2015 …
Persistent link: https://www.econbiz.de/10011988697
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An empirical assessment of global capital productivity
Knolle, Julia; Lehmann, Kai - 2016
cost of capital (WACC), which are employed by firms in their investment appraisals as a benchmark return. The paper uses an … original WACC data set for many OECD countries and for the time period 2000-2015. Data are adjusted for tax distortions and …
Persistent link: https://www.econbiz.de/10011521179
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The cost of debt capital revisited
Baule, Rainer - In: Business Research 12 (2019) 2, pp. 721-753
We propose a method to estimate the cost of debt in a continuous-time framework with an infinite time horizon. The approach builds on the class of well-known earnings before interest and taxes (EBIT)-based models. It extends other approaches based on option-pricing theory with a finite...
Persistent link: https://www.econbiz.de/10012502877
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Investitionsrechnerische Bewertung von ausfallgefährdeten Krediten
Nippel, Peter - 2016
Effektivverzinsung äquivalenter Kredite und die Diskontierung erwarteter Zahlungen aus dem Kredit mit risikoadäquaten Kapitalkosten …, ausfallgefährdeten Krediten geschaffen werden. Gegenübergestellt werden die Diskontierung von vereinbarten Zahlungen mit der …
Persistent link: https://www.econbiz.de/10011418109
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Firm characteristics and the use of investment decision techniques in the global south: Evidence from Ghana
Owusu-Ansah, Anthony; Addico, Nene Lartey; Amewu, Godfred - In: Cogent Business & Management 10 (2023) 1, pp. 1-41
This study uses a survey approach to investigate how managers associated with thirty (30) firm characteristics subgroups apply thirty-seven (37) investment decision techniques in practice in a frontier market covering: capital budgeting, cost of equity, cost of capital, and adjustments for other...
Persistent link: https://www.econbiz.de/10014527354
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A two-tiered approach to the valuation of investment projects adjusted for governance risk
Apreda, Rodolfo - 2009
the net present value of the project by discounting its cash flows with a temporal structure of rates of return adjusted …
Persistent link: https://www.econbiz.de/10010323277