Principles Of The Capital Asset Pricing Model And The Importance In Firm Valuation

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Principles of the Capital Asset Pricing Model and the Importance in Firm Valuation

Author : Nadine Pahl
Publisher : GRIN Verlag
ISBN 13 : 3640303350
Total Pages : 77 pages
Book Rating : 4.6/5 (43 download)

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Book Synopsis Principles of the Capital Asset Pricing Model and the Importance in Firm Valuation by : Nadine Pahl

Download or read book Principles of the Capital Asset Pricing Model and the Importance in Firm Valuation written by Nadine Pahl and published by GRIN Verlag. This book was released on 2009-04 with total page 77 pages. Available in PDF, EPUB and Kindle. Book excerpt: Research Paper (undergraduate) from the year 2007 in the subject Business economics - Investment and Finance, grade: 1,0, University of Applied Sciences Berlin, course: Financial Management, language: English, abstract: In everything you do, or don't do, there is a chance that something will happen that you didn't count on. Risk is the potential for unexpected things to happen. Risk aversion is a common thing among almost all investors. Investors generally dislike uncertainty or risk and agree that a safe dollar is worth more than a risky one. Therefore, investors will have to be persuaded to take higher risk by the offer of higher returns. In this investment context, the additional compensation for taking on higher risk is a higher rate of return.Every investment has a risk element: The investor will always not be certainwhether the investment will be able to generate the required income. The degree of risk defers from industry to industry but also from company to company. It is not possible to eliminate the investment risk altogether but to reduce is. Nevertheless, often there remains a risky part. According to the degree of risk, the investor demands a corresponding rate of return that is, of course, higher than the rate of return of risk-free investments. Taking on a risk should be paid off. The Capital Asset Pricing Model (CAPM) is an economic model for valuing stocks, securities, derivatives and/or assets by relating risk and expected rate of return. CAPM is based on the idea that investors demand additional expected return if they are asked to accept additional risk.

The Arbitrage Pricing Theory as an Approach to Capital Asset Valuation

Author : Christian Koch
Publisher : GRIN Verlag
ISBN 13 : 364027718X
Total Pages : 76 pages
Book Rating : 4.6/5 (42 download)

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Book Synopsis The Arbitrage Pricing Theory as an Approach to Capital Asset Valuation by : Christian Koch

Download or read book The Arbitrage Pricing Theory as an Approach to Capital Asset Valuation written by Christian Koch and published by GRIN Verlag. This book was released on 2009-02-27 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: Diploma Thesis from the year 1996 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,3, European Business School - International University Schloß Reichartshausen Oestrich-Winkel, language: English, abstract: A “few surprises” could be the trivial answer of the Arbitrage Pricing Theory if asked for the major determinants of stock returns. The APT was developed as a traceable framework of the main principles of capital asset pricing in financial markets. It investigates the causes underlying one of the most important fields in financial economics, namely the relationship between risk and return. The APT provides a thorough understanding of the nature and origins of risk inherent in financial assets and how capital markets reward an investor for bearing risk. Its fundamental intuition is the absence of arbitrage which is, indeed, central to finance and which has been used in virtually all areas of financial study. Since its introduction two decades ago, the APT has been subject to extensive theoretical as well as empirical research. By now, the arbitrage theory is well established in both respects and has enlightened our perception of capital markets. This paper aims to present the APT as an appropriate instrument of capital asset pricing and to link its principles to the valuation of risky income streams. The objective is also to provide an overview of the state of art of APT in the context of alternative capital market theories. For this purpose, Section 2 describes the basic concepts of the traditional asset pricing model, the CAPM, and indicates differences to arbitrage theory. Section 3 constitutes the main part of this paper introducing a derivation of the APT. Emphasis is laid on principles rather than on rigorous proof. The intuition of the pricing formula and its consistency with the state space preference theory are discussed. Important contributions to the APT are classified and briefly reviewed, the question of APT’s empirical evidence and of its risk factors is attempted to be answered. In Section 4, arbitrage theory is linked to traditional as well as to innovative valuation methods. It includes a discussion of the DCF method, arbitrage valuation and previews an option pricing approach to security valuation. Finally, Section 5 concludes the paper with some practical considerations from the investment community.

The Capital Asset Pricing Model

Author :
Publisher : Bookboon
ISBN 13 : 8776817121
Total Pages : 57 pages
Book Rating : 4.7/5 (768 download)

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Book Synopsis The Capital Asset Pricing Model by :

Download or read book The Capital Asset Pricing Model written by and published by Bookboon. This book was released on with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Principles of Private Firm Valuation

Author : Stanley J. Feldman
Publisher : John Wiley & Sons
ISBN 13 : 047148721X
Total Pages : 192 pages
Book Rating : 4.4/5 (714 download)

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Book Synopsis Principles of Private Firm Valuation by : Stanley J. Feldman

Download or read book Principles of Private Firm Valuation written by Stanley J. Feldman and published by John Wiley & Sons. This book was released on 2005-04-06 with total page 192 pages. Available in PDF, EPUB and Kindle. Book excerpt: A complete explanation of the issues that determine private firm value Principles of Private Firm Valuation combines recent academic research and practical real-world experience to help readers better understand the multitude of factors that determine private firm value. For the financial professional serving private firms-who are increasingly being called upon to give advice on issues related to firm valuation and deal structure-this comprehensive guide discusses critical topics, including how firms create value and how to measure it, valuing control, determining the size of the marketability discount, creating transparency and the implications for value, the value of tax pass-through entities versus a C corporation, determining transaction value, and the valuation implications of FASB 141 (purchase price accounting) and 142 (goodwill impairment). Dr. Stanley J. Feldman (Lowell, MA) is Associate Professor of Finance at Bentley College, where he currently teaches courses in corporate finance with a focus on business valuation and business strategy at both the graduate and undergraduate levels. He is a member of the FASB Valuation Resource Group and is Chairman and cofounder of Axiom Valuation Solutions.

Investment Valuation and Asset Pricing

Author : James W. Kolari
Publisher : Springer Nature
ISBN 13 : 3031167848
Total Pages : 247 pages
Book Rating : 4.0/5 (311 download)

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Book Synopsis Investment Valuation and Asset Pricing by : James W. Kolari

Download or read book Investment Valuation and Asset Pricing written by James W. Kolari and published by Springer Nature. This book was released on 2023-01-01 with total page 247 pages. Available in PDF, EPUB and Kindle. Book excerpt: This textbook is intended to fill a gap in undergraduate finance curriculums by providing an asset pricing text that is accessible for undergraduate finance students. It offers an overview of original works on foundational asset pricing studies that follows their historical publication chronologically throughout the text. Each chapter stays close to the original works of these major authors, including quotations, examples, graphical exhibits, and empirical results. Additionally, it includes statistical concepts and methods as applied to finance. These statistical materials are crucial to learning asset pricing, which often applies statistical tests to evaluate different asset pricing models. It offers practical examples, questions, and problems to help students check their learning and better understand the fundamentals of asset pricing., alongside including PowerPoint slides and an instructor’s manual for professors.

COST OF CAPITAL (A FINANCIAL TOOL TO CREATE AND MAXIMIZE SHAREHOLDER VALUE)

Author : EMMANUEL ATTAH KUMAH
Publisher : Lulu.com
ISBN 13 : 1304260453
Total Pages : 140 pages
Book Rating : 4.3/5 (42 download)

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Book Synopsis COST OF CAPITAL (A FINANCIAL TOOL TO CREATE AND MAXIMIZE SHAREHOLDER VALUE) by : EMMANUEL ATTAH KUMAH

Download or read book COST OF CAPITAL (A FINANCIAL TOOL TO CREATE AND MAXIMIZE SHAREHOLDER VALUE) written by EMMANUEL ATTAH KUMAH and published by Lulu.com. This book was released on 2013-07-27 with total page 140 pages. Available in PDF, EPUB and Kindle. Book excerpt: The cost of capital is important in the financial management of every business. A measure of the cost of capital is required when evaluating various aspects of strategic business plans, e.g., selecting a financial leverage position, calculating the profitability of alternative investment opportunities, measuring economic value-added and comparing various merger and acquisition plans. The task of determining the appropriate cost of capital to use requires a careful analysis of the effect of alternative financing choices which are open to every business. This report considers the cost of capital of Royal Roots Company. Ways are examined to determine the cost of capital by Royal Roots Company. This book sequentially identifies: principles of cost of capital, the capital structure, the cost of debt, cost of equity, cost of preference shares and overall cost of capital (weighted average cost of capital).The cost of equity capital and debt determines the overall cost of capital of any company (public or private)

Capital Asset Pricing Model 85 Success Secrets - 85 Most Asked Questions on Capital Asset Pricing Model - What You Need to Know

Author : Mildred Hart
Publisher : Emereo Publishing
ISBN 13 : 9781488854866
Total Pages : 76 pages
Book Rating : 4.8/5 (548 download)

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Book Synopsis Capital Asset Pricing Model 85 Success Secrets - 85 Most Asked Questions on Capital Asset Pricing Model - What You Need to Know by : Mildred Hart

Download or read book Capital Asset Pricing Model 85 Success Secrets - 85 Most Asked Questions on Capital Asset Pricing Model - What You Need to Know written by Mildred Hart and published by Emereo Publishing. This book was released on 2014-10-11 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: Capital Asset Pricing Model Starts right here. There has never been a Capital Asset Pricing Model Guide like this. It contains 85 answers, much more than you can imagine; comprehensive answers and extensive details and references, with insights that have never before been offered in print. Get the information you need--fast! This all-embracing guide offers a thorough view of key knowledge and detailed insight. This Guide introduces what you want to know about Capital Asset Pricing Model. A quick look inside of some of the subjects covered: Outline of finance - Discounted cash flow valuation, Capital asset - The most specific common definitions in use are as follows, Market portfolio, Idiosyncrasy - Idiosyncrasy in economics, Upside risk - Upside Risk vs. Capital Asset Pricing Model, The Theory of Investment Value - Theory, Real option - Applicability of standard techniques, Financial correlation, Beta (finance), Financial portfolio - Description, Working capital management - Capitalization structure, List of business theorists - L, Corporate finance - Capitalization structure, Master of Financial Economics - Structure, Covariance - In financial economics, Passive management - Rationale, Financial econometrics, Covariance matrix - In financial economics, Outline of finance - Fundamental financial concepts, Fundamental analysis - Two analytical models, Portfolio (finance) - Description, John Lintner, Behavioral portfolio theory, Linear regression - Finance, NHH - 1963ndash;1980: A new campus and rapid growth, CAPM, Returns-based style analysis - Concept, Kenneth French, Business valuation - Weighted average cost of capital (WACC), Capital budgeting - Capital Budgeting Definition, Working capital management - Investment and project valuation, Investment theory, List of publications in economics - Capital asset pricing model, and much more...

Damodaran on Valuation

Author : Aswath Damodaran
Publisher : John Wiley & Sons
ISBN 13 : 0470049375
Total Pages : 698 pages
Book Rating : 4.4/5 (7 download)

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Book Synopsis Damodaran on Valuation by : Aswath Damodaran

Download or read book Damodaran on Valuation written by Aswath Damodaran and published by John Wiley & Sons. This book was released on 2016-02-08 with total page 698 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Aswath Damodaran is simply the best valuation teacher around. If you are interested in the theory or practice of valuation, you should have Damodaran on Valuation on your bookshelf. You can bet that I do." -- Michael J. Mauboussin, Chief Investment Strategist, Legg Mason Capital Management and author of More Than You Know: Finding Financial Wisdom in Unconventional Places In order to be a successful CEO, corporate strategist, or analyst, understanding the valuation process is a necessity. The second edition of Damodaran on Valuation stands out as the most reliable book for answering many of today?s critical valuation questions. Completely revised and updated, this edition is the ideal book on valuation for CEOs and corporate strategists. You'll gain an understanding of the vitality of today?s valuation models and develop the acumen needed for the most complex and subtle valuation scenarios you will face.

Principles of Corporate Finance

Author : Richard A. Brealey
Publisher :
ISBN 13 :
Total Pages : 1130 pages
Book Rating : 4.:/5 (318 download)

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Book Synopsis Principles of Corporate Finance by : Richard A. Brealey

Download or read book Principles of Corporate Finance written by Richard A. Brealey and published by . This book was released on 1996 with total page 1130 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive coverage of financial theory with analysis and applications. Students are taught to solve problems and learn how and why companies and management act in the way they do. Controversial issues are covered, and this fifth edition has been updated and basic materials streamlined. There is increased coverage of the procedures for estimating the cost of capital - the discounted cash flow model, capital asset pricing model, and arbitrage pricing model. Estimates are included from a variety of industries such as oil, pharmaceutical and gas and electric, and there is expanded coverage of risk management and techniques and the use and misuse of derivatives. End of chapter quizzes and problems have been updated and increased to test students knowledge and supplement packages have been expanded.

Capital Asset Pricing Model (CAPM). A Case Study

Author : Alexander Moßhammer
Publisher : GRIN Verlag
ISBN 13 : 365688787X
Total Pages : 20 pages
Book Rating : 4.6/5 (568 download)

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Book Synopsis Capital Asset Pricing Model (CAPM). A Case Study by : Alexander Moßhammer

Download or read book Capital Asset Pricing Model (CAPM). A Case Study written by Alexander Moßhammer and published by GRIN Verlag. This book was released on 2015-02-02 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2015 in the subject Business economics - Investment and Finance, grade: 1,00, University of Innsbruck (Department of Banking and Finance), course: Proseminar: Financial Management, language: English, abstract: The purpose of this paper is to do empirical research on the capital asset pricing model. The bases of our research are the returns of three stocks, the S&P 500 index which represents the market and the LIBOR as a proxy for the risk-free interest rate. The three companies that were chosen in this paper were Kellogg Company, KB Financial Group Inc. and Kate Spade & Company and all of them in combination represent our fictive market.

Portfolio Theory and Capital Markets

Author : William F. Sharpe
Publisher : McGraw-Hill Companies
ISBN 13 : 9780071353205
Total Pages : 0 pages
Book Rating : 4.3/5 (532 download)

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Book Synopsis Portfolio Theory and Capital Markets by : William F. Sharpe

Download or read book Portfolio Theory and Capital Markets written by William F. Sharpe and published by McGraw-Hill Companies. This book was released on 2000 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Thirty years ago, Portfolio Theory and Capital Markets laid the groundwork for today's investment standards, from modern portfolio theory to derivatives, pricing and investment, equity index funds, and more. By providing invaluable insights into the Capital Asset Pricing Model (CAPM) and introducing such innovations as the Sharpe Ratio, Dr. William Sharpe established himself as one of the most influential financial minds of the twentieth century. Now, in Portfolio Theory and Capital Markets, The Original Edition, complete with a new foreword written by Dr. Sharpe, McGraw-Hill reintroduces this essential book - and places its lessons in a meaningful context for modern investors throughout the world."--BOOK JACKET.Title Summary field provided by Blackwell North America, Inc. All Rights Reserved

An Empirical and Theoretical Analysis of Capital Asset Pricing Model

Author : Mohammad Sharifzadeh
Publisher : Universal-Publishers
ISBN 13 : 1599423758
Total Pages : 180 pages
Book Rating : 4.5/5 (994 download)

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Book Synopsis An Empirical and Theoretical Analysis of Capital Asset Pricing Model by : Mohammad Sharifzadeh

Download or read book An Empirical and Theoretical Analysis of Capital Asset Pricing Model written by Mohammad Sharifzadeh and published by Universal-Publishers. This book was released on 2010-11-18 with total page 180 pages. Available in PDF, EPUB and Kindle. Book excerpt: The problem addressed in this dissertation research was the inability of the single-factor capital asset pricing model (CAPM) to identify relevant risk factors that investors consider in forming their return expectations for investing in individual stocks. Identifying the appropriate risk factors is important for investment decision making and is pertinent to the formation of stocks' prices in the stock market. Therefore, the purpose of this study was to examine theoretical and empirical validity of the CAPM and to develop and test a multifactor model to address and resolve the empirical shortcomings of the single-factor CAPM. To verify the empirical validity of the standard CAPM and of the multifactor model, five hypotheses were developed and tested against historical monthly data for U.S. public companies. Testing the CAPM hypothesis revealed that the explanatory power of the overall stock market rate of return in explaining individual stock's expected rates of return is very weak, suggesting the existence of other risk factors. Testing of the other hypotheses verified that the implied volatility of the overall market as a systematic risk factor and the companies' size and financial leverage as nonsystematic risk factors are important in determining stock's expected returns and investors should consider these factors in their investment decisions. The findings of this research have important implications for social change. The outcome of this study can change the way individual and institutional investors as well as corporations make investment decisions and thus change the equilibrium prices in the stock market. These changes in turn could lead to significant changes in the resource allocation in the economy, in the economy's production capacity and production composition, and in the employment structure of the society.

The Economics of Business Valuation

Author : Patrick Anderson
Publisher : Stanford University Press
ISBN 13 : 0804783225
Total Pages : 441 pages
Book Rating : 4.8/5 (47 download)

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Book Synopsis The Economics of Business Valuation by : Patrick Anderson

Download or read book The Economics of Business Valuation written by Patrick Anderson and published by Stanford University Press. This book was released on 2013-04-10 with total page 441 pages. Available in PDF, EPUB and Kindle. Book excerpt: For decades, the market, asset, and income approaches to business valuation have taken center stage in the assessment of the firm. This book brings to light an expanded valuation toolkit, consisting of nine well-defined valuation principles hailing from the fields of economics, finance, accounting, taxation, and management. It ultimately argues that the "value functional" approach to business valuation avoids most of the shortcomings of its competitors, and more correctly matches the actual motivations and information set held by stakeholders. Much of what we know about corporate finance and mathematical finance derives from a narrow subset of firms: publicly traded corporations. The value functional approach can be readily applied to both large firms and companies that do not issue publicly traded stocks and bonds, cannot borrow without constraints, and often rely upon entrepreneurs to both finance and manage their operations. With historical side notes from an international set of sources and real-world exemplars that run throughout the text, this book is a future-facing resource for scholars in economics and finance, as well as the academically minded valuation practitioner.

Accounting for Value

Author : Stephen Penman
Publisher : Columbia University Press
ISBN 13 : 0231521855
Total Pages : 265 pages
Book Rating : 4.2/5 (315 download)

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Book Synopsis Accounting for Value by : Stephen Penman

Download or read book Accounting for Value written by Stephen Penman and published by Columbia University Press. This book was released on 2010-12-30 with total page 265 pages. Available in PDF, EPUB and Kindle. Book excerpt: Accounting for Value teaches investors and analysts how to handle accounting in evaluating equity investments. The book's novel approach shows that valuation and accounting are much the same: valuation is actually a matter of accounting for value. Laying aside many of the tools of modern finance the cost-of-capital, the CAPM, and discounted cash flow analysis Stephen Penman returns to the common-sense principles that have long guided fundamental investing: price is what you pay but value is what you get; the risk in investing is the risk of paying too much; anchor on what you know rather than speculation; and beware of paying too much for speculative growth. Penman puts these ideas in touch with the quantification supplied by accounting, producing practical tools for the intelligent investor. Accounting for value provides protection from paying too much for a stock and clues the investor in to the likely return from buying growth. Strikingly, the analysis finesses the need to calculate a "cost-of-capital," which often frustrates the application of modern valuation techniques. Accounting for value recasts "value" versus "growth" investing and explains such curiosities as why earnings-to-price and book-to-price ratios predict stock returns. By the end of the book, Penman has the intelligent investor thinking like an intelligent accountant, better equipped to handle the bubbles and crashes of our time. For accounting regulators, Penman also prescribes a formula for intelligent accounting reform, engaging with such controversial issues as fair value accounting.

Asset Pricing and Portfolio Performance

Author : Robert A. Korajczyk
Publisher :
ISBN 13 :
Total Pages : 424 pages
Book Rating : 4.3/5 (555 download)

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Book Synopsis Asset Pricing and Portfolio Performance by : Robert A. Korajczyk

Download or read book Asset Pricing and Portfolio Performance written by Robert A. Korajczyk and published by . This book was released on 1999 with total page 424 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive reference work presenting an original framework for evaluating observed differences in returns across assets.

Valuation Approaches and Metrics

Author : Aswath Damodaran
Publisher : Now Publishers Inc
ISBN 13 : 1601980140
Total Pages : 102 pages
Book Rating : 4.6/5 (19 download)

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Book Synopsis Valuation Approaches and Metrics by : Aswath Damodaran

Download or read book Valuation Approaches and Metrics written by Aswath Damodaran and published by Now Publishers Inc. This book was released on 2005 with total page 102 pages. Available in PDF, EPUB and Kindle. Book excerpt: Valuation lies at the heart of much of what we do in finance, whether it is the study of market efficiency and questions about corporate governance or the comparison of different investment decision rules in capital budgeting. In this paper, we consider the theory and evidence on valuation approaches. We begin by surveying the literature on discounted cash flow valuation models, ranging from the first mentions of the dividend discount model to value stocks to the use of excess return models in more recent years. In the second part of the paper, we examine relative valuation models and, in particular, the use of multiples and comparables in valuation and evaluate whether relative valuation models yield more or less precise estimates of value than discounted cash flow models. In the final part of the paper, we set the stage for further research in valuation by noting the estimation challenges we face as companies globalize and become exposed to risk in multiple countries.

Capital Investment and Valuation

Author : Richard A. Brealey
Publisher : McGraw Hill Professional
ISBN 13 : 9780071383776
Total Pages : 580 pages
Book Rating : 4.3/5 (837 download)

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Book Synopsis Capital Investment and Valuation by : Richard A. Brealey

Download or read book Capital Investment and Valuation written by Richard A. Brealey and published by McGraw Hill Professional. This book was released on 2003 with total page 580 pages. Available in PDF, EPUB and Kindle. Book excerpt: Capital Investment and Valuation addresses the many ways in which corporations value assets and make investment decisions. Filled with information and ideas that are both thought provoking and functional, it provides an indispensable look into the theory and mechanics of valuation and investing, including: the six ideas that must be understood for effective capital investment and valuation; cost/benefit analyses of mergers, buyouts, spinoffs, and other corporate control issues; and strategies for creating shareholder value through integrated investment and operation programs. -- Book jacket.