Abstract
Estimating cost of capital is a complicated task as there are many methods to calculate it. However, among the present set of methods, the most contemporary and widely accepted methods are CAPM for estimating cost of equity and synthetic rating method for cost of debt. Both need to be combined using either book value weights or market value weights. The target capital structure provides most futuristic approach to look at the cost of capital. If the purpose of the calculating cost of capital is for the future like for valuation or capital budgeting, the target capital structure may provide better estimate of cost of capital than market value weights.
Keywords
Cost of capital; CAPM, Synthetic Rating; WACC; Valuation
Citations
IRE Journals:
Rahul Singh Gautam , Venkata Mrudula Bhimavarapu
"Contemporary Methods to Estimate Cost of Capital in a Firm" Iconic Research And Engineering Journals Volume 6 Issue 1 2022 Page 268-272
IEEE:
Rahul Singh Gautam , Venkata Mrudula Bhimavarapu
"Contemporary Methods to Estimate Cost of Capital in a Firm" Iconic Research And Engineering Journals, 6(1)
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