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| Author: | Ben-Horim, M. Callen, J. L. |
| Title: | The Cost of Capital, Macaulay`s Duration and Tobin's q |
| Journal: | Journal of Financial Research
1989 : SUMMER, VOL. 12:2, p.143-156 |
| Index terms: | CAPITAL EQUITY CAPITAL |
| Language: | eng |
| Abstract: | The authors demonstrate empirically that the cost of equity of capital estimated from the dividend discount model and Tobin's q are negatively correlated. The theoretical relationship between these variables is used in the determination of alternative estimates of cost of equity capital and Macaulay's duration without estimating the growth rate in the conventional way. This new approach can easily be implemented for large firms reporting SFAS no. 33 data. For smaller firms, the estimation of the replacement costs of their assets is necessary. |
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