Cost of Capital: Estimation and Applications, Second Edition
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SHANNON P. PRATT, CFA, FASA, MCBA, is a founder and Managing Director of Willamette Management Associates, one of the oldest and largest independent valuation consulting, economic analysis, and financial advisory firms, with offices in principal cities across the United States. Over a distinguished career of more than three decades, he has performed valuation engagements for M&As, ESOPs, and numerous other purposes. He has testified in a wide variety of federal and state courts across the country and frequently participates in arbitration and mediation proceedings. Dr. Pratt is one of the most successful and respected authors in his field. He is coauthor of several industry standards, including Valuing a Business: the Analysis and Appraisal of Closely Held Companies and Valuing Small Businesses and Professional Practices. He is also Editor-in-Chief of Shannon Pratt's Business Valuation Updates, the primary monthly newsletter in the field of business valuation.
English
List of Exhibits.
Foreword.
Preface.
Acknowledgments.
Introduction.
Notation System Used in This Book.
Part I: Cost of Capital Basics.
1. Defining Cost of Capital.
2. Introduction to Cost of Capital Applications: Valuation and Project Selection.
3. Net Cash Flow: The Preferred Measure of Return.
4. Discounting versus Capitalizing.
5. Relationship between Risk and the Cost of Capital.
6. Cost Components of a Company's Capital Structure.
7. Weighted Average Cost of Capital.
Part II: Estimating the Cost of Equity Capital.
8. Build-up Models.
9. Capital Asset Pricing Model.
10. Proper Use of Betas.
11. Size Effect.
12. DCF Method of Estimating Cost of Capital.
13. Using Ibbotson Associates Cost of Capital Data (Michael W. Barad and Tara McDowell).
14. Arbitrage Pricing Model.
Part III: Other Topics Related to Cost of Capital.
15. Minority versus Control Implications of Cost of Capital Data.
16. Handling the Discount for Lack of Marketability.
17. How Cost of Capital Relates to the Excess Earnings Method of Valuation.
18. Common Errors in Estimation and Use of Cost of Capital.
19. Cost of Capital in the Courts.
20. Cost of Capital in Ad Valorem Taxation (Carl R.E. Hoemke).
21. Capital Budgeting and Feasibility Studies.
22. Central Role of Cost of Capital in Economic Value Added (Joel M. Stern, G. Bennett Stewart III, and Donald H. Chew Jr.).
Appendixes.
Appendix A: Bibliography.
Appendix B: Courses and Conferences.
Appendix C: Data Resources.
Appendix D: Developing Cost of Capital (Capitalization Rates and Discount Rates) Using ValuSource PRO Software (Z. Christopher Mercer, ASA, CFA).
Appendix E: Iterative Process Using CAPM to Calculate the Cost of Equity Component of the Weighted Average Cost of Capital (Harold G. Martin, Jr., MBA, CPA/ABV, ASA, CFE).
Appendix F: International Glossary of Business Valuation Terms.
Appendix G: Converting After-tax Discount Rates to Pretax Discount Rates.
CPE Self-study Examination.
Index.
Foreword.
Preface.
Acknowledgments.
Introduction.
Notation System Used in This Book.
Part I: Cost of Capital Basics.
1. Defining Cost of Capital.
2. Introduction to Cost of Capital Applications: Valuation and Project Selection.
3. Net Cash Flow: The Preferred Measure of Return.
4. Discounting versus Capitalizing.
5. Relationship between Risk and the Cost of Capital.
6. Cost Components of a Company's Capital Structure.
7. Weighted Average Cost of Capital.
Part II: Estimating the Cost of Equity Capital.
8. Build-up Models.
9. Capital Asset Pricing Model.
10. Proper Use of Betas.
11. Size Effect.
12. DCF Method of Estimating Cost of Capital.
13. Using Ibbotson Associates Cost of Capital Data (Michael W. Barad and Tara McDowell).
14. Arbitrage Pricing Model.
Part III: Other Topics Related to Cost of Capital.
15. Minority versus Control Implications of Cost of Capital Data.
16. Handling the Discount for Lack of Marketability.
17. How Cost of Capital Relates to the Excess Earnings Method of Valuation.
18. Common Errors in Estimation and Use of Cost of Capital.
19. Cost of Capital in the Courts.
20. Cost of Capital in Ad Valorem Taxation (Carl R.E. Hoemke).
21. Capital Budgeting and Feasibility Studies.
22. Central Role of Cost of Capital in Economic Value Added (Joel M. Stern, G. Bennett Stewart III, and Donald H. Chew Jr.).
Appendixes.
Appendix A: Bibliography.
Appendix B: Courses and Conferences.
Appendix C: Data Resources.
Appendix D: Developing Cost of Capital (Capitalization Rates and Discount Rates) Using ValuSource PRO Software (Z. Christopher Mercer, ASA, CFA).
Appendix E: Iterative Process Using CAPM to Calculate the Cost of Equity Component of the Weighted Average Cost of Capital (Harold G. Martin, Jr., MBA, CPA/ABV, ASA, CFE).
Appendix F: International Glossary of Business Valuation Terms.
Appendix G: Converting After-tax Discount Rates to Pretax Discount Rates.
CPE Self-study Examination.
Index.
