search query: @author Kulkarni, M. S. / total: 3
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| Author: | Kulkarni, M. S. Powers, M. Shannon, D. S. |
| Title: | The use of segment earnings betas in the formation of divisional hurdle rates. |
| Journal: | Journal of Business Finance and Accounting
1991 : JUN, VOL. 18:4, p. 497-512 |
| Index terms: | BETA FACTOR DIVISIONALISED COMPANIES |
| Language: | eng |
| Abstract: | A method for establishing a hurdle rate for each division of a diversified firm is proposed. It is based on a systematic risk measure. Beginning with an example of product-line betas, it is demonstrated how the multi-product firm can use these product-line betas in conjunction with a firm's market beta to adjust its overall cost of capital for each of its divisions. Aggregate product-line betas calculated from forty-two publicly held companies are reported. One publicly held company is selected to illustrate the estimation of divisional cost of capital using the relevant aggregate product-line betas. The proposed technique is not ad hoc but is market by its objectivity. |
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