Risk sensitivity indicator as correction factor for cost of capital rate Report as inadecuate




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Abstract

Cost of capital rate is a result of risk included in cost of debt rates and cost of equity rates. Generally to estimate cost of capital rates with use of CAPM conception, is used information about general risk indicator, known as beta coefficient and relations between debt and equity rates. Such approach in unmodified version, falsely gives the similar results for enterprises from the same sector and with similar levels of debt to equity relations. In paper is presented risk sensitivity indicator conception which allows to differentiate cost of capital rate between more risk sensitive businesses and less sensitive businesses.



Item Type: MPRA Paper -

Original Title: Risk sensitivity indicator as correction factor for cost of capital rate-

English Title: Risk sensitivity indicator as correction factor for cost of capital rate-

Language: English-

Keywords: risk sensitivity, cost of capital, enterprise value, sensitivity indicator-

Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and UncertaintyG - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill-





Author: Michalski, Grzegorz

Source: https://mpra.ub.uni-muenchen.de/43399/







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