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Look Inside The Cost of Capital

The Cost of Capital
Intermediate Theory


  • Date Published: March 2005
  • availability: Available
  • format: Paperback
  • isbn: 9780521000444

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About the Authors
  • This book provides an answer to the question, 'What does the finance and economics literature say about the determination and estimation of a project's cost of capital?'. Uniquely, it reviews both the theory of asset pricing in discrete time and a range of more applied topics which relate to project valuation, including the effects of corporate and personal taxes, the international dimension, estimation of the cost of equity in practice, and the cost of capital for regulated utilities. It seeks to explain models and arguments in a way which does justice to the reasoning, whilst minimising the prior knowledge of finance and maths expected of the reader. It acts as a bridge between a general undergraduate or MBA text in finance, accounting or economics, and the modern theoretical literature on the cost of capital.

    • Unique focus on the cost of capital alone, thus making a much needed contribution to corporate finance
    • Only text book which reviews theory on the cost of capital at an intermediate level
    • Reviews both 'pure' asset pricing theory and 'applied' theory such as the effects of taxes
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    Product details

    • Date Published: March 2005
    • format: Paperback
    • isbn: 9780521000444
    • length: 370 pages
    • dimensions: 247 x 172 x 26 mm
    • weight: 0.73kg
    • contains: 4 tables
    • availability: Available
  • Table of Contents

    Part I. Expected Returns on Financial Assets:
    1. The cost of capital under certainty
    2. Allowing for uncertainty: contingent states
    3. The capital asset pricing model and multifactor models
    4. The consumption-based model
    5. The equity risk premium
    Part II. A Project's Cost of Capital:
    6. Project valuation
    7. Corporation tax, leverage and the weighted average cost of capital
    8. Personal tax and the cost of equity: the old and the new views
    9. Personal tax, leverage and multiple tax rates
    10. Inflation and risk premiums
    11. The international dimension
    Part III. Estimating the Cost of Capital:
    12. The cost of equity: inference from present value
    13. The cost of equity: applying the CAPM and multifactor models
    14. Estimating a project's cost of capital
    15. Regulated utilities.

  • Author

    Seth Armitage, Heriot-Watt University, Edinburgh
    Seth Armitage is a Reader in Finance and head of the finance group at Heriot-Watt University, Edinburgh. His current and recent research centres on the financing of companies and has included work on rights issues and open offers, the role of banks in funding companies, sources of finance in developing countries and mutual financial institutions. He is the author of Syndicated Lending in Europe (1998).

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