Cost of Capital
Estimating the cost of capital is critical when assessing the long-run expected return on investments. From valuing individual securities or capital projects to evaluating mergers or acquisitions, estimating the cost of capital is one of the most important decisions that corporate finance professionals make. The limitations of the methods commonly used to estimate the cost of capital have been magnified in the wake of the economic turbulence of the last Financial Crisis. New challenges have arisen in estimating the cost of capital that all corporate finance professionals need to be aware of. The information on this page is intended to provide more detail and discussion about these new challenges, and to provide the most up-to-date thought leadership in estimating the cost of capital. Bookmark this page and check back for periodic updates.
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The 2016 Industry Cost of Capital handbook includes data through March 2016 and features cost of capital estimates for approximately 180 U.S. industries. It also highlights the impact of "off-balance sheet" debt on the capital structure of each of the industries, plus levered and unlevered betas calculated both with and without the off-balance sheet debt for each of the industries.
The 2016 Valuation Handbook- Guide to Cost of Capital contains 3 intra-year Quarterly Updates and is comprised of data through December 2015. The first quarter includes data through March, the second quarter includes data through June, and the third quarter contains data through September. It also provides year-end data and can be used to develop estimates for both levered and unlevered cost of capital.
The 2015 International Valuation Handbook – Industry Cost of Capital includes data through March 31, 2015. It also includes a semi-annual update with data published through September 30, 2015. The handbook features industry-level cost of capital estimates, levered and unlevered beta estimates, valuation multiples and much more.
The 2015 Valuation Handbook - Guide to Cost of Capital features cost of capital estimates for over 200 U.S. industries and includes data through December 2014. Additional intra-quarterly updates with data through March, June and September 2015 are available in PDF format. Key features in the handbook include cost of capital inputs, a review of the topics that come up when performing valuation analysis and examples for properly using the data.
The 2015 Valuation Handbook – Industry Cost of Capital includes data through March 2015, with three intra-quarterly updates available with data through June, September and December 2015. Key features made available in the handbook include the analysis of over 200 U.S. industries, industry and peer group betas, analysis of off-balance-sheet debt, analysis of high-financial-risk companies and more.
The 2014 Valuation Handbook - Guide to Cost of Capital includes data through December 2013, with intra-quarterly updates to approximately 250 industry risk premia made available with data through March, June and September 2014. The handbook also includes valuation data sets for CRSP Deciles Size Premia data and Risk Premium Report data.
The 2014 Valuation Handbook - Industry Cost of Capital features data published through March 31, 2014 that uses industry aggregation methodology, analysis of the balance-sheet debt on capital structure and other methods of cost of capital estimation. Intra-quarterly updates with new data were made available via PDF in June, September and December 2014.