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Estimating the Cost of Capital Implied by Market Prices and Accounting Data
Author(s): Peter Easton
Source: Journal:Foundations and Trends® in Accounting ISSN Print:1554-0642, ISSN Online:1554-0650 Publisher:Now Publishers Volume 2 Number 4, Pages: 124(241-364) DOI: 10.1561/1400000009
Abstract:
Estimating the Cost of Capital Implied by Market Prices and Accounting Data focuses on estimating the expected rate of return implied by market prices, summary accounting numbers, and forecasts of earnings and dividends. Estimates of the expected rate of return, often used as proxies for the cost of capital, are obtained by inverting accounting-based valuation models. The author describes accounting-based valuation models and discusses how these models have been used, and how they may be used, to obtain estimates of the cost of capital.
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