Cost of Capital: Workbook and Technical Supplement, 4th Edition

About the Author.

Acknowledgments.

Notation System and Abbreviations Using in This Book.

PART ONE: Technical Supplement—Supplements to Chapters of Cost of Capital: Applications and Examples, 4th ed.

CHAPTER 1: Alternative Net Cash Flow Definitions—Supplement to Chapter 3.

Introduction.

Equity Cash Flow Method.

Invested Capital Method.

Capital Cash Flow Method.

Adjusted Present Value Method.

Residual Income Method.

CHAPTER 2: Examples of Computing OLS Beta, Sum Beta, and Full Information Beta Estimates—Supplement to Chapter 10.

Introduction.

Computing OLS and Sum Beta Estimates—An Example.

Computing Full-Information Beta Estimate—An Example.

CHAPTER 3: Estimating Beta: Interpreting Regression Statistics—Supplement to Chapter 10.

Introduction.

Evaluating Beta Estimation Output.

Evaluating Regression Output.

CHAPTER 4: Example of Computing Downside Beta Estimates—Supplement to Chapter 12.

Introduction.

Computing Downside Beta Estimates.

CHAPTER 5: Iterative Process Using CAPM to Calculate the Cost of Equity Component of the Weighted Average Cost of Capital When Capital Structure Is Constant—Supplement to Chapter 18.

Introduction.

Capital Asset Pricing Model and Beta.

Solution: The Iterative Process.

Iterative Process Using a Financial Spreadsheet Model.

Summary.

Additional Reading.

CHAPTER 6: Iterative Process Using CAPM to Calculate the Cost of Equity Component of the Weighted Average Cost of Capital When Capital Structure Is Changing—Supplement to Chapter 18.

Introduction.

Assumptions Inherent in Weighted Average Cost of Capital.

Solution: Iterative Process with Changing Capital Structure.

Iterative Process Using Financial SpreadsheetModel.

Equity Value.

Summary.

Additional Reading.

CHAPTER 7: Cost of Capital and the Valuation of Worthless Stock—Supplement to Chapter 16.

Introduction.

Liquidating Value.

Potential Value.

Example.

Possibility That Value of the Business Enterprise Exceeds the Face Value of Debt—Pricing Equity as a Call Option.

Potential Future Value: Probability That Business Enterprise Exceeds Face Value of Debt.

Additional Considerations.

Summary.

PART TWO: Technical Supplement—Specific Applications of Cost of Capital.

CHAPTER 8: Cost of Capital of Private Investment Company Interests.

Introduction.

The Private Investment Company.

Relationships between Time to a Liquidity Event and Value.

Lack of Control.

Lack of Marketability or Illiquidity.

Example Valuation of PIC Interest.

Summary.

CHAPTER 9: Cost of Capital of Real Property—Individual Assets.

Introduction.

Typical Structure of a Real Estate Transaction.

Real Property Competes with Other Asset Classes.

Direct Capitalization Method.

Discounted Cash Flow Method.

Estimating the Property Discount Rate.

Summary.

Appendix 9A: Valuing Real Property.

CHAPTER 10: Cost of Capital of Real Estate Entities.

Introduction.

Definition of a Real Estate Entity.

Measuring Net Cash Flow for Real Estate Entities.

Valuation of Real Estate Entities.

Summary.

Additional Reading.

Appendix 10A: Valuing Real Estate Entities.

PART THREE: Learning Objectives, Questions, and Problems.

PART FOUR: Answers and Solutions.

Index.