L_17_ - Outline Lecture 17 Organization Cost of Capital...

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Outline Lecture 17 Organization Cost of Capital Dividend Growth Model Cost of Debt
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THE COST OF CAPITAL: Basic Ideas Cost of capital is the required rate of return (or appropriate discount rate) . Cost of Capital (Required Rate of Return) is different for debt and equity financing _______.
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The Cost of Capital: Cost of Equity The return that investors require for the equity financing can be estimated by one of the two models: CAPM approach Dividend Growth Model Approach
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The Capital Asset Pricing Model The CAPM: The CAPM for Assets i :
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CAPM The Security Market Line (SML) E(R M ) 0 Expected Return, Required Return Asset beta, β
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The Cost of Capital: Cost of Equity Now consider Dividend Growth Model Approach
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The Dividend Growth Model Approach For Equity Stocks that pays dividends D i , this implies that the Price P of equity stock is : In 1938, John Burr Williams postulated what has become the fundamental theory of valuation :
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Common Stock Valuation: The Zero Growth Case
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L_17_ - Outline Lecture 17 Organization Cost of Capital...

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