Contents
Introduction to Cost of Capital Applications: Valuation, Project Selection, and Ratemaking
Net Cash Flow: The Preferred Measure of Economic Income
Alternative Measures of Economic Income
Discounting versus Capitalizing
Equivalency of Capitalizing Residual Income
Relationship between Risk and the Cost of Capital
Estimating the Cost of Equity Capital
Other Sources of ERP Estimates
Beta: Differing Definitions and Estimates
Examples of Computing OLS Beta, Sum Beta, and Full-information Beta Estimates
Estimating Beta: Interpreting Regression Statistics
Unlevering and Levering Equity Betas
Criticism of CAPM and Beta versus Other Risk Measures
Example of Computing Downside Beta Estimates
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