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Discount Rate—Explanation, Definition and Examples

Valutico

Weighted Average Cost of Capital (WACC): WACC is the average rate of return a company is expected to provide to all its investors, including equity and debt holders. It is calculated by weighting the cost of equity and cost of debt based on their proportions in the capital structure.

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Review the concept of WACC

Andrew Stolz

The formula implies the return an investor expects from a risk-free investment plus the return from the stock in relation to market volatility. The market risk premium is calculated from a market rate of return less a risk-free rate. In practice, it is difficult for the firm to maintain its capital structure.

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The Dividend Discount Model (DDM): The Black Sheep of Valuation?

Brian DeChesare

Even if you pick the right company, though, the DDM is more difficult to set up and use than a standard DCF because it requires more assumptions and knowledge of the company’s capital structure. Dividend Discount Model, Part 3: Capital Structure Projections You don’t want to “rock the boat” too much with Cash and Debt in this model.

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DEBRA, next big tax reform in Europe?

Simply Treasury

The definition of "net equity" is as follows: equity of the company = sum of subscribed capital, share premiums, revaluation reserves, reserves and retained earnings, minus the tax value of the company's holdings in associated companies and the tax value of its own shares.

Equity 52
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Data Update 6 for 2023: A Wake up call for the Indebted?

Musings on Markets

In this section, I will lay out a mechanism for evaluating the effects of borrowing on the cost of funding a business, i.e., the cost of capital, and talk about why firms may under or overshoot this optimal.

Equity 52
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SWS Group: The Breakdown

Appraisal Rights

In addition, the court found that the exercise of warrants three months prior to the merger pursuant to the Credit Agreement, which resulted in a change to SWS’s capital structure by cancelling debt in exchange for new shares, was part of SWS’s “operative reality” for purposes of the fair-value determination.

Beta 40
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Discounted-Cash-Flow-Analysis: Your Complete Guide with Examples

Valutico

Rf = Risk-free Rate. Rm – Rf) = Equity Market Risk Premium. Cp = Cost of Equity Premium. DCF WACC—similar to the above except that it calculates a different WACC in each forecast period based on a changing capital structure (D/E) and thus a changing beta in each period. Ce = Cost of Equity. B = Beta.