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  Estimating Cost of Capital in the Current Economic Environment Brown Bag Presentation February 13, 2009 Paul Daddio
Introduction ,[object Object],[object Object],[object Object],[object Object]
Issues To Be Addressed ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Risk-free Rate Estimation ,[object Object],[object Object],[object Object],[object Object],[object Object]
Average Monthly Yield on 20-Year Treasury Bonds
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Risk-free Rate Estimation (continued)
Equity Risk Premium Estimation ,[object Object],[object Object],[object Object],[object Object]
Equity Risk Premium Estimation (continued) ,[object Object],[object Object],[object Object],[object Object]
Equity Risk Premium Estimation (continued) ,[object Object],[object Object]
Beta Estimation ,[object Object],[object Object],[object Object],[object Object],[object Object]
Beta Estimation (continued) Measuring beta at time 2 will result in an invalid estimate of beta because the “look-back period includes an aberrant time period (period B). A better estimate may be derived at time 1, even if the valuation date is time 2.
Beta Estimation (continued) ,[object Object],[object Object],[object Object],[object Object]
Cross-checking For Reasonableness ,[object Object],[object Object],[object Object]
Cross-checking For Reasonableness (continued) ,[object Object],[object Object],[object Object]
Conclusions ,[object Object],[object Object],[object Object],[object Object]
Conclusions (continued) ,[object Object],[object Object]

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Estimating Cost of Capital in the Current Environment

  • 1. Estimating Cost of Capital in the Current Economic Environment Brown Bag Presentation February 13, 2009 Paul Daddio
  • 2.
  • 3.
  • 4.
  • 5. Average Monthly Yield on 20-Year Treasury Bonds
  • 6.
  • 7.
  • 8.
  • 9.
  • 10.
  • 11. Beta Estimation (continued) Measuring beta at time 2 will result in an invalid estimate of beta because the “look-back period includes an aberrant time period (period B). A better estimate may be derived at time 1, even if the valuation date is time 2.
  • 12.
  • 13.
  • 14.
  • 15.
  • 16.