Cost Of Capital Flashcards
1
Q
Degear
A
Beta Asset = (E/D+E) * Beta Equity
2
Q
Regear
A
Beta Equity = Beta Asset * (1 + D/E
3
Q
E(Ri)
A
Rf + Bi(E(Rm)-Rf)
Risk free + beta (return on market - risk free)
4
Q
NPV
A
-C0 + C1/(1+r) + C2/(1+r)^2 + …
5
Q
Estimation of Beta
A
Cov(Ri, Rm) / Var (Rm)
Covariance of Asset and Market /
Variance of the Market
6
Q
Cost of debt capital = ??
A
Risk Free + Default Spread
