The cost of capital is the fundamental financial tool for business decision-making. It drives measures of value creation and destruction, and forms the basis of financial analysis using cash flow and other frameworks.
The Real Cost of Capital takes a practical approach and describes the key issues in understanding and using the cost of capital today, taking principles from the world of managerial finance and putting them into the context of major investment decisions.
Should, for example, a company use its own cost of capital to appraise new investments and acquisitions? What cost of capital might a US company use when appraising an investment in, say, the Philippines? For a typical investment, which type of risk is more important - specific risk or systematic risk? How should these risks be reflected in, say, a venture capital situation? Debt is cheaper than equity - so why don't companies raise more debt than they do? This book will help you find the answers.
Prologue: The Cost of Capital World is a Real World
Chapter 1: Risk and Return Revisited
Chapter 2: CAPM @ Work
Chapter 3: The Great EMRP Debate
Chapter 4: CAPM is Dead: Long Live CAPM
Chapter 5: The Cost of Debt and Optimal Capital Structure
Chapter 6: International WACC and Country Risk
Chapter 7: Cash Flows, the Dot.Com Bubble and All That
Chapter 8: Using the Cost of Capital in Business Valuations
Chapter 9: International Valuation and Appraisal
Chapter 10: Premia and Discounts