Publication result detail

Determination of the Cost of Equity by means of the CAPM Method

TURKOVÁ, J.; KORYTÁROVÁ, J.

Original Title

Determination of the Cost of Equity by means of the CAPM Method

English Title

Determination of the Cost of Equity by means of the CAPM Method

Type

Paper in proceedings (conference paper)

Original Abstract

The article deals with the problematic of the calculation of the cost of equity as an inseparable part of the weighted average cost of capital (WACC) value determination (Miller R. A., USA, 2009). Various methods can be used for the calculation of the cost of equity. This text concentrates on the CAPM (Capital Asset Pricing Model) method based on the objectively identified inputs and market valuation risks (Tham J., USA, 2004).This model requires three inputs for the calculation – risk-free interest rate, beta coefficient and return on the market portfolio shares (Damodaran A., USA, 2001). In spite of considering this method to be the most objective and most commonly used in valuation practice, it has also several disadvantages.

English abstract

The article deals with the problematic of the calculation of the cost of equity as an inseparable part of the weighted average cost of capital (WACC) value determination (Miller R. A., USA, 2009). Various methods can be used for the calculation of the cost of equity. This text concentrates on the CAPM (Capital Asset Pricing Model) method based on the objectively identified inputs and market valuation risks (Tham J., USA, 2004).This model requires three inputs for the calculation – risk-free interest rate, beta coefficient and return on the market portfolio shares (Damodaran A., USA, 2001). In spite of considering this method to be the most objective and most commonly used in valuation practice, it has also several disadvantages.

Keywords

Discount rate, weighted cost of capital, cost of equity, capital asset pricing, risk premium, beta coefficient

Key words in English

Discount rate, weighted cost of capital, cost of equity, capital asset pricing, risk premium, beta coefficient

Authors

TURKOVÁ, J.; KORYTÁROVÁ, J.

Released

16.10.2014

Publisher

VUT v Brně, FAST, EKŘ

Location

Brno

ISBN

978-80-214-5050-9

Book

PBE PhD FORUM 2014

Pages from

163

Pages to

170

Pages count

8

BibTex

@inproceedings{BUT111728,
  author="Jiřina {Vrbková} and Jana {Korytárová}",
  title="Determination of the Cost of Equity by means of the CAPM Method",
  booktitle="PBE PhD FORUM 2014",
  year="2014",
  number="1",
  pages="163--170",
  publisher="VUT v Brně, FAST, EKŘ",
  address="Brno",
  isbn="978-80-214-5050-9"
}