37 Thedetailsofthiscalculationwillbeexploredlaterinthis
chapter.
38 Foramorecompletediscussionofthisestimationprocess,
please look at thepaper titled “Estimating Company Risk
Exposure to Country Risk” on my web site
(www.damodaran.com, under “Research/Papers”).
39 The regression yielded the following result:
ReturnEmbraer= 0.0195 + 0.2681 ReturnC-Bond
40 Apricemultipleisobtainedbydividingthemarketprice
byitsearningsoritsbookvalue.Studiesindicatethatstocks
that have low price-to-earnings multiples or low
price-to-bookvaluemultiplesearnhigherreturnsthanother
stocks.
41 E. F. Fama and K. R. French, “The Cross-Section of
Expected Return,”Journal of Finance47 (1992): 427-466.
42 Thebook-to-priceratioistheratioofthebookvalueof
equity to the market value of equity.
43 F. Modigliani and M. Miller, “The Cost of Capital,
Corporation Finance and the Theory of Investment,”
American Economic Review48 (1958): 261-297.
44 Financialobligationreferstoany paymentthatthefirm
has legally obligated itself to make, such as interest and
principal payments. It does not include discretionary cash
flows, such as dividend payments or new capital
expenditures,whichcanbedeferredordelayedwithoutlegal
consequences, though there may be economic consequences.