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Cost of Capital

H. Kent Baker, J. Clay Singleton, and E. Theodore Veit

in Survey Research in Corporate Finance: Bridging the Gap between Theory and Practice

Published in print:
2010
Published Online:
May 2011
ISBN:
9780195340372
eISBN:
9780199894215
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780195340372.003.0004
Subject:
Economics and Finance, Financial Economics

This chapter reviews the findings of academic surveys of corporate executives indicating the estimation and use of cost of capital (also known as weighted average cost of capital or WACC). The ... More


Tax Reform and the Cost of Capital

Dale W. Jorgenson and Kun-Young Yun

Published in print:
1991
Published Online:
November 2003
ISBN:
9780198285939
eISBN:
9780191596490
Item type:
book
Publisher:
Oxford University Press
DOI:
10.1093/0198285930.001.0001
Subject:
Economics and Finance, Public and Welfare

The concept of ‘cost of capital’ was introduced almost thirty years ago and quickly became an indispensable tool for modelling the impact of tax policy on investment behaviour. In the 1980s it ... More


Investment: The Cost and Availability of Finance

R. C. O. Matthews, C. H. Feinstein, and J. C. Odling‐Smee

in British Economic Growth 1856-1973: The Post-War Period in Historical Perspective

Published in print:
1982
Published Online:
November 2003
ISBN:
9780198284536
eISBN:
9780191596629
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0198284535.003.0012
Subject:
Economics and Finance, Economic History

A favourable trend in the supply price of finance (SPOF) schedule for domestic investment between pre‐1914 and the post‐war period can be inferred from the fact that in the post‐war period the rate ... More


Introduction

Dale W. Jorgenson and Kun‐Young Yun

in Tax Reform and the Cost of Capital

Published in print:
1991
Published Online:
November 2003
ISBN:
9780198285939
eISBN:
9780191596490
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0198285930.003.0001
Subject:
Economics and Finance, Public and Welfare

This introductory chapter shows how the concept of cost of capital arises in the management of capital as a factor of production. The concept is introduced of an effective tax rate within a highly ... More


How Should the Firm Compensate Its Sales Force? The Basic Model

Sharan Jagpal

in Fusion for Profit: How Marketing and Finance Can Work Together to Create Value

Published in print:
2008
Published Online:
September 2008
ISBN:
9780195371055
eISBN:
9780199870745
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780195371055.003.0016
Subject:
Business and Management, Marketing

This chapter shows how the firm should design sales force compensation plans to maximize its performance. It distinguishes whether or not the firm can observe the salesperson's effort. It shows how ... More


Pick a Name, Any Name: Economic Profit, Residual Income, or Economic Value Added

John D. Martin, J. William Petty, and James S. Wallace

in Value–Based Management with Corporate Social Responsibility

Published in print:
2009
Published Online:
September 2009
ISBN:
9780195340389
eISBN:
9780199867257
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780195340389.003.0005
Subject:
Economics and Finance, Macro- and Monetary Economics, Financial Economics

Economic value added (EVA) is based on the concept of residual income. For the financial accountant, there is no cost for equity capital. However, for the financial economist, a cost is associated ... More


Multinational Cost of Capital and Capital Structure

FRANCK BANCEL, USHA R. MITTOO, and ZHOU ZHANG

in International Finance: A Survey

Published in print:
2012
Published Online:
May 2013
ISBN:
9780199754656
eISBN:
9780199979462
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780199754656.003.0022
Subject:
Economics and Finance, Financial Economics, International

Financial theory predicts that multinational corporations (MNCs) should have a lower cost of capital and a higher leverage level compared to domestic corporations (DCs) because of their enhanced ... More


State of the Art: Do Theory and Practice Actually Meet?

H. Kent Baker, J. Clay Singleton, and E. Theodore Veit

in Survey Research in Corporate Finance: Bridging the Gap between Theory and Practice

Published in print:
2010
Published Online:
May 2011
ISBN:
9780195340372
eISBN:
9780199894215
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780195340372.003.0009
Subject:
Economics and Finance, Financial Economics

This chapter begins by describing the application, usefulness, and limitations of normative and positive theory. The chapter continues with a discussion of the application, usefulness, and ... More


Free Cash-Flow Valuation: The Foundation of Value-Based Management

John D. Martin, J. William Petty, and James S. Wallace

in Value–Based Management with Corporate Social Responsibility

Published in print:
2009
Published Online:
September 2009
ISBN:
9780195340389
eISBN:
9780199867257
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780195340389.003.0004
Subject:
Economics and Finance, Macro- and Monetary Economics, Financial Economics

The concept of free cash flow is the foundation of value-based management. No matter what we choose to do, free cash flow should be at the heart of any effort to understand how management can ... More


Investment: Introduction

R. C. O. Matthews, C. H. Feinstein, and J. C. Odling‐Smee

in British Economic Growth 1856-1973: The Post-War Period in Historical Perspective

Published in print:
1982
Published Online:
November 2003
ISBN:
9780198284536
eISBN:
9780191596629
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0198284535.003.0011
Subject:
Economics and Finance, Economic History

In considering the causes of movements of investment, our conceptual framework in the next two chapters is that investment is determined by the intersection of the supply price of finance schedule ... More


The Need to Measure What You Want to Manage

John D. Martin, J. William Petty, and James S. Wallace

in Value–Based Management with Corporate Social Responsibility

Published in print:
2009
Published Online:
September 2009
ISBN:
9780195340389
eISBN:
9780199867257
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780195340389.003.0003
Subject:
Economics and Finance, Macro- and Monetary Economics, Financial Economics

This chapter first explains the importance of using a single metric to manage the creation of a firm's value. While multiple-measure techniques such as the balanced scorecard can yield valuable ... More


Working Capital Financing Costs

Lorenzo A. Preve and Virginia Sarria-Allende

in Working Capital Management

Published in print:
2010
Published Online:
May 2010
ISBN:
9780199737413
eISBN:
9780199775637
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780199737413.003.0011
Subject:
Economics and Finance, Financial Economics

In this chapter, we discuss the financing costs associated with working capital. Given that working capital is financed with both long‐term debt and equity, we identify the corresponding risk ... More


Integrated versus Segmented Capital Markets: Implications for Financial Decision-Making

LUC SOENEN and ROBERT JOHNSON

in International Finance: A Survey

Published in print:
2012
Published Online:
May 2013
ISBN:
9780199754656
eISBN:
9780199979462
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780199754656.003.0018
Subject:
Economics and Finance, Financial Economics, International

The market risk premium (MRP) remains one of the most debated issues in corporate finance. The MRP is a critical input when measuring a company’s cost of equity and weighted cost of capital. Thus, a ... More


Competition Issues and Private Infrastructure Investment through Public-Private Partnerships

R. Richard Geddes

in Competition and the State

Published in print:
2014
Published Online:
September 2014
ISBN:
9780804789394
eISBN:
9780804791625
Item type:
chapter
Publisher:
Stanford University Press
DOI:
10.11126/stanford/9780804789394.003.0004
Subject:
Law, Competition Law

This chapter discusses how the use of public-private partnerships (PPPs) to provide critical infrastructure is rising in the United States. One of the main arguments in favor of public provision, ... More


Structure of the Intertemporal General Equilibrium Model

Dale W. Jorgenson, Richard J. Goettle, Mun S. Ho, and Peter J. Wilcoxen

in Double Dividend: Environmental Taxes and Fiscal Reform in the United States

Published in print:
2014
Published Online:
September 2014
ISBN:
9780262027090
eISBN:
9780262318563
Item type:
chapter
Publisher:
The MIT Press
DOI:
10.7551/mitpress/9780262027090.003.0002
Subject:
Economics and Finance, Development, Growth, and Environmental

This chapter describes the IGEM in detail – the demand and supply sides of the economy, the inter-industry (input-output) structure and the determination of intertemporal equilibrium. The production ... More


Should We Fear Capital Flows?

René M. Stulz

in International Financial Markets: The Challenge of Globalization

Published in print:
2003
Published Online:
February 2013
ISBN:
9780226032146
eISBN:
9780226032153
Item type:
chapter
Publisher:
University of Chicago Press
DOI:
10.7208/chicago/9780226032153.003.0004
Subject:
Economics and Finance, International

This chapter analyzes the advantages and disadvantages of capital flows for the international financial market. It explains the benefits of capital mobility which include reduction of the cost of ... More


Credibility, Commitment, and Regulation: Ex Ante Price Caps and Ex Post Interventions

Dieter Helm

in The Natural Resources Trap: Private Investment without Public Commitment

Published in print:
2010
Published Online:
August 2013
ISBN:
9780262013796
eISBN:
9780262275538
Item type:
chapter
Publisher:
The MIT Press
DOI:
10.7551/mitpress/9780262013796.003.0014
Subject:
Economics and Finance, Econometrics

This chapter sets out the origins of RPI-X regulation and the context of privatization, with its multiple objectives—and not just efficiency. It describes the salient framework of the regulatory ... More


Cost of Capital for Private Equity

Alain Coën and Aurélie Desfleurs

in Private Equity: Opportunities and Risks

Published in print:
2015
Published Online:
August 2015
ISBN:
9780199375875
eISBN:
9780199375899
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780199375875.003.0009
Subject:
Economics and Finance, Financial Economics

After a short literature review on the cost of capital for private equity (PE), this chapter focuses on the cost of equity estimation for PE. First, unbiased estimators are used to correct for ... More


Valuing Private Equity

Harlan Platt and Emery A. Trahan

in Private Equity: Opportunities and Risks

Published in print:
2015
Published Online:
August 2015
ISBN:
9780199375875
eISBN:
9780199375899
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780199375875.003.0008
Subject:
Economics and Finance, Financial Economics

Private equity (PE) firms generate returns by following an investment process similar to that of any investor. That is, they buy assets at a price for less than what they can be sold in the future. ... More


PRACTICAL APPLICATION OF THE INCOME METHOD

Patrick L. Anderson

in The Economics of Business Valuation: Towards a Value Functional Approach

Published in print:
2013
Published Online:
September 2013
ISBN:
9780804758307
eISBN:
9780804783224
Item type:
chapter
Publisher:
Stanford University Press
DOI:
10.11126/stanford/9780804758307.003.0014
Subject:
Economics and Finance, Financial Economics

The author focuses in this chapter on the workhorse income approach to valuation. Based on his extensive practical experience, he discusses the essential steps of forecasting future business revenue, ... More


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