Corporate Capital Costs: A Practitioner'S Guide
AbstractCentral to modern finance theory is an understanding of the cost of capital-the minimum required rate of return that is used by companies and investors for both valuation and ongoing performance measurement. This paper provides new insights into the market risk premium for U.S. equities, as well as better methods for measuring and quantifying a company's systematic risk. In so doing, it furnishes evidence that stock market investors now expect a 5% return premium over 30-year government bonds-a decline from the 6-8% premiums suggested by the Ibbotson-Sinquefeld data that extends from 1926 to the present. The author argues that, because of structural changes in the global economy and capital markets, only the most recent 40 or 50 years of data are relevant for estimating current risk premiums. Like the article that precedes it, this article also notes that the 30-year Treasury bond has an increasing component of systematic risk, and the author provides a method of applying the CAPM that removes that risk component from the "risk-free" rate and shifts it to the market risk premium. 1999 Morgan Stanley.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Morgan Stanley in its journal Journal of Applied Corporate Finance.
Volume (Year): 12 (1999)
Issue (Month): 1 ()
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=1078-1196
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.