Risk sensitivity indicator as correction factor for cost of capital rate
AbstractCost of capital rate is a result of risk included in cost of debt rates and cost of equity rates. Generally to estimate cost of capital rates with use of CAPM conception, is used information about general risk indicator, known as beta coefficient and relations between debt and equity rates. Such approach in unmodified version, falsely gives the similar results for enterprises from the same sector and with similar levels of debt to equity relations. In paper is presented risk sensitivity indicator conception which allows to differentiate cost of capital rate between more risk sensitive businesses and less sensitive businesses.
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.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 43399.
Date of creation: 19 Aug 2012
Date of revision: 02 Sep 2012
risk sensitivity; cost of capital; enterprise value; sensitivity indicator;
Other versions of this item:
- Grzegorz Michalski, 2012. "Risk sensitivity indicator as correction factor for cost of capital rate," EconStor Conference Papers 67534, ZBW - German National Library of Economics.
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-12 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Simona Mateut & Spiros Bougheas & Paul Mizen, .
"Corporate trade credit and inventories: New evidence of a tradeoff from accounts payable and receivable,"
08/09, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
- Bougheas, Spiros & Mateut, Simona & Mizen, Paul, 2009. "Corporate trade credit and inventories: New evidence of a trade-off from accounts payable and receivable," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 300-307, February.
- Stewart C. Myers & Raghuram G. Rajan, 1998.
"The Paradox of Liquidity,"
CRSP working papers
339, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Kim, Chang-Soo & Mauer, David C. & Sherman, Ann E., 1998. "The Determinants of Corporate Liquidity: Theory and Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(03), pages 335-359, September.
- Michalski, Grzegorz, 2008.
"Value-Based Inventory Management,"
Journal for Economic Forecasting,
Institute for Economic Forecasting, vol. 5(1), pages 82-90, March.
- Michalski, Grzegorz, 2007.
"Portofolio Managament Approach in Trade Credit Decision Making,"
Journal for Economic Forecasting,
Institute for Economic Forecasting, vol. 4(3), pages 42-53, September.
- Grzegorz Michalski, 2013. "Portfolio Management Approach in Trade Credit Decision Making," Papers 1301.3823, arXiv.org.
- Opler, Tim & Pinkowitz, Lee & Stulz, Rene & Williamson, Rohan, 1999.
"The determinants and implications of corporate cash holdings,"
Journal of Financial Economics,
Elsevier, vol. 52(1), pages 3-46, April.
- Tim Opler & Lee Pinkowitz & Rene Stulz & Rohan Williamson, 1997. "The Determinants and Implications of Corporate Cash Holdings," NBER Working Papers 6234, National Bureau of Economic Research, Inc.
- Grzegorz Michalski, 2013.
"Planning Optimal From the Firm Value Creation Perspective Levels of Operating Cash Investments,"
- Michalski, Grzegorz, 2010. "Planning Optimal From The Firm Value Creation Perspective. Levels Of Operating Cash Investments," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 198-214, March.
- Robert Parrino & Allen M. Poteshman & Michael S. Weisbach, 2002.
"Measuring Investment Distortions when Risk-Averse Managers Decide Whether to Undertake Risky Projects,"
NBER Working Papers
8763, National Bureau of Economic Research, Inc.
- Robert Parrino & Allen M. Poteshman & Michael S. Weisbach, 2005. "Measuring Investment Distortions when Risk-Averse Managers Decide Whether to Undertake Risky Projects," Financial Management, Financial Management Association, vol. 34(1), Spring.
- Kim, Yong H & Atkins, Joseph C, 1978. "Evaluating Investments in Accounts Receivable: A Wealth Maximizing Framework," Journal of Finance, American Finance Association, vol. 33(2), pages 403-12, May.
- Beck, Stacie & Stockman, David R., 2005. "Money as real options in a cash-in-advance economy," Economics Letters, Elsevier, vol. 87(3), pages 337-345, June.
- Leigh A. Riddick & Toni M. Whited, 2009. "The Corporate Propensity to Save," Journal of Finance, American Finance Association, vol. 64(4), pages 1729-1766, 08.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.