We incorporate fixed and variable costs into a cash flow based CAPM to investigate how each type of cost affects the cost of equity capital. A decrease in fixed costs always reduces cost of capital. With positive fixed costs, a decrease in the variable cost rate reduces cost of capital despite...

This paper develops a technique to infer the accuracy of analysts' forecasts of different components of earnings when databases contain forecasts of only bottom line (or limited component) earnings forecasts. We focus our analysis on three components - sales, operating profit percentage, and...

We investigate the effect of shareholder taxes on expected stock returns using a model that characterizes both the optimal portfolios of taxable and tax-exempt investors and the expected rates of return on risky stocks. When all income is taxed at the same effective rate, each investor's...