Cost of Capital - Theory and Applications

Session Date: 
Nov 14, 2017 - 3:15pm4:30pm

Session Tracks:

The cost of capital is one the most important considerations in estimating value using the income approach. In this session, participants will learn the theory underlying the cost of capital, as well as practical applications using the Duff & Phelps Valuation Handbook CRSP and Risk Premium Report data. Derivation of both the cost of equity and invested capital will be presented.

  • Learn alternative methods for estimating the cost of equity (Build Up, ACAPM) and cost of invested capital (WACC)
  • Learn alternative sources of empirical data (Duff & Phelps Valuation Handbook CRSP and Risk Premium Report data)
  • Understand determination of the values for the risk free rate, equity risk premium, size premium, and specific company risk
  • Estimate of the WACC using alternative methods (e.g., iterative model, optimal capital structure).

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