Multicriteria Estimated Cost of Equity Capital

AD-minister

Juan Carlos Gutiérrez Betancur¹ 

[1] Universidad EAFIT

关键词: Financial Decision Making;    Analytic Hierarchy Process (AHP);    Cost ofEquity;    Non Traded Firms;    Market Risk Premium;    Beta;    Business Risk;    Private Risk;    Neural Firings;    Valuation.;   

DOI  :  

学科分类：社会科学、人文和艺术（综合）

来源: Universidad E A F I T

【 摘 要 】

The estimation of the cost of equitycapital is a key input to the capital budgeting  process when the firmuses internal financing. Financial analyst and managers usually utilizethe CAPM to estimate the cost of equity which requires both measurementof  the market risk premium and estimation of beta. For publicly tradedfirms, calculating the cost of equity is entirely based on informationfrom the financial markets. Non traded firms and small businesses do nothave sufficient market based information. This article proposes amulticriteria model to determine the cost of equity for non tradedfirms. The Analytic Hierarchy Process developed by Thomas Saaty is theproposed methodology for deriving relative priorities of tangible andintangible corporate risk factors. The model requires business managersto identify the relevant information sources for the required inputdata. The inconsistencies checking mechanism within the AHP model allowsmanagement to identify inconsistencies, to revise prior judgments andto synthesize coherently.

【 授权许可】

Unknown