Musings on Markets

FEBRUARY 27, 2023

An Optimizing Tool In my second and third data posts for this year, I chronicled the effects of rising interest rates and risk premiums on costs of equity and capital. The market debt ratio, in contrast, uses the market's estimate of the value of equity, i.e., its market capitalization, as the value of equity.

Equity 52

Equity EBITDA Start-ups Net Debt 52

Musings on Markets

JANUARY 5, 2024

In my corporate finance class, I describe all decisions that companies make as falling into one of three buckets – investing decisions, financing decision and dividend decisions. Beta & Risk 1. Equity Risk Premiums 2. Financing Flows 5. Standard Deviation in Equity/Firm Value 2.

Dividends 98

Dividends Risk Premium Equity Book Value 98

Musings on Markets

JANUARY 6, 2023

Check rules of thumb : Investing and corporate finance are full of rules of thumb, many of long standing. For example, I have seen it asserted that a stock that trades at less than book value is cheap or that a stock that trades at more than twenty times EBITDA is expensive. Price to Book 3. Cost of Equity 1.

Risk Premium 52

Risk Premium Dividends EBITDA Start-ups 52

Musings on Markets

JANUARY 31, 2024

In my last three posts, I looked at the macro (equity risk premiums, default spreads, risk free rates) and micro (company risk measures) that feed into the expected returns we demand on investments, and argued that these expected returns become hurdle rates for businesses, in the form of costs of equity and capital.

Equity 79

Equity Book Value Start-ups Corporate Finance 79