Theoretical and Applied Economics
No. 9 / 2007 (514)
Assessing Discount Rate for a Project Financed Entirely with Equity Capital
Academia de Studii Economice, Bucuresti
Abstract. Estimating discount rate for an investment project is one of the most challenging tasks in capital budgeting. In this paper we discuss different kind of models for cost of equity capital proposed in finance literature (static CAPM, conditional CAPM, APT, build-up model), focusing especially on advantages and disadvantages of using each of them. In the final section, we estimate the discount rate for a certain project financed entirely with equity capital, using a version of build-up model.
Keywords: capital budgeting; discount rate; cost of equity capital; risk-return models; build-up models.
Contents
- Overtime-whereto?
George Moldoveanu
Octavian Thor Pleter
- Disciplinary Accountability in the Financial Area
Viorel Lefter
Costantin Roman
- The Capital Market in the Context of the Integration within the European Union
Gabriela Anghelache
- Aspects Related to Researching Consumer Preferences
Mirela-Cristina Voicu
- Two Different Views on Monetary Policy Impact: The New Consensus and Post-Keynesian Economics
Marius-Corneliu Marinas
- Systems of Enterprise Governance and their Effects on the Economic Performance
Alecxandrina Deaconu
Cornelia Lefter
- Evaluation of the Risk and of the Opportunities in Launching the New Banking Services
Iuliana Cetina
Nora Mihail