Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )
Kristin Kandy is a small privately owned candy-manufacturing business. To estimate its beta, we looked at publicly traded food p ...
Which of these costs of equity should we use in valuing KristinKandy?Theanswerwilldependonwhothepotential buyerforthefirmis.Ifth ...
Thedisadvantageofthisapproachisthatittarsallcompanies inacountrywiththesamebrushandassumesthattheyareall exposed to country risk ...
Thefirstistobaseitontheproportionofafirm’srevenuesin aparticularmarket,scaledtotheaveragefirm’srevenuesin thatmarket.Thus,acompa ...
premiumof4.67%estimatedforBrazil(fromearlierinthe chapter). The costs of equity resulting from the three approaches described in ...
Regression or Proxy Models Allthemodelsdescribedsofarbeginbydefiningmarketrisk inbroad termsand thendeveloping modelsthatmightbe ...
MV = Market value of equity BV = Book value of equity Thevaluesformarketvalueofequityandbook-to-priceratios for individual firms ...
Thus,thecostofequityisthesumofthedividendyieldand thelong-termexpectedgrowthrateindividends(orearnings). Forastockwithadividendy ...
Estimation Approaches Aswithcostofequity,thereareanumberofdifferentwaysin whichwecanestimatethecostsofcapital.Inthissubsection, ...
usingtheunleveredcostofequityasthecostofcapitalwill yield an incorrect estimate of value. Implied Costs of Capital In the subsec ...
additiontothecostofequity,andtakingaweightedaverage ofthecosts.Inthissubsection,weconsiderfirstthecostsof theseothercomponentsan ...
theextentofitsfinancialobligations—includinginterestand principal payments. 44 Firms that generate high cash flows relative to t ...
Theratingsassigned bytheseagencies areletterratings.A rating of AAA from Standard & Poor’s and Aaa from Moody’s representsth ...
ratedon thebasisof default risk.Whenthere isno rating available to estimate the cost of debt, there are two alternatives: 1.Rece ...
Interest Coverage RatioRatingTypical Default Spread 9.50–12.50 AA 0.50 7.50–9.50 A+ 0.70 6.00–7.50 A 0.85 4.50–6.00 A– 1.00 4.00 ...
ratios,whichareweightedtogenerateaZ-Score.Theratios used and their relative weights are usually based on past historyon defaulte ...
If itis a smallfirmand the taxrate ishigher for higherincomebrackets,theaverage taxrate across allincomewillbelowerthanthetaxra ...
that firms can carry losses forward and can offset them againstprofitsinfutureperiods.Themostprudentassessment ofthetaxeffectsof ...
defaultspreadforA-ratedbondsis1%.Addingthis spreadontotherisk-freerateof4.50%atthetimeof theanalysisyieldsa pretaxcost ofdebtof ...
Cost of Preferred Stock Preferred stock shares some of the characteristics of debt—thepreferreddividendisprespecifiedatthetimeof ...
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