We develop and apply a valuation model that quantifies the interest rate risk inherent in fixed-rate reverse mortgages. Consistent with intuition, our results show that the interest rate risk of a reverse mortgage is greater than that of either a typical coupon bond or a regular mortgage....

A new approach for estimating divisional betas is developed in this study. The approach is based on a sound theoretical foundation; utilizes all available information, yet still has parsimonious data requirements; can be implemented with simple statistical tools; and provides unambiguously...

An analysis of the dual problem described by Ronn (1987) reveals that it provides a powerful and easily interpretable test for the hypothesis of a single class of marginal investors, including models of equilibrium based on a “representative tax bracket.” When Ronn's empirical tests are...

According to a recent survey, the discounted cash flow approach is the valuation technique most widely used by companies evaluating acquisition targets. But because the DCF approach is inappropriate when the capital structure is changing during the forecast period, many analysts turn to the...

The primary objective of this paper is to derive a multi-factor equilibrium model using a mean-variance approach. The results of this derivation provide greater insight into the nature of the resulting factors than does APT. There are several important implications for empirical tests of any <italic>a...</italic>

In The Search for Value: Measuring the Company's Cost of Capital, Michael C. Ehrhardt analyzes the latest prescriptive techniques and models for determining the cost of capital. He provides a comprehensive framework for practitioners by detailing the various methods for accurately evaluating...