The practice of estimating the term structure of discount rates
AbstractIt is extremely difficult, in practice, to precisely estimate the term structure of discount rates for capital budgeting purposes. In this paper I argue that, with only minor adjustments to current standard practice, a corporate treasurer can determine a multi-period cost of capital that is both theoretically robust and likely to be sufficiently accurate for most practical purposes. For this to be the case, corporations should have a preference for using real, rather than nominal, discounted cash flow techniques.
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Bibliographic InfoArticle provided by Elsevier in its journal Global Finance Journal.
Volume (Year): 19 (2009)
Issue (Month): 3 ()
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Web page: http://www.elsevier.com/locate/inca/620162
Capital budgeting Discounted cash flow analysis Cost of capital Risk-free rate Real analysis;
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