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| Author: | Bufka, J. Kemper, O. Schiereck, D. |
| Title: | A note on estimating the divisional cost of capital for diversified companies: an empirical evaluation of heuristic-based approaches |
| Journal: | European Journal of Finance
2004 : FEB, VOL. 10:1, p. 68-80 |
| Index terms: | Capital costs Heuristic methods Risk management |
| Language: | eng |
| Abstract: | This note provides an empirical analysis of the potential for heuristic-based approaches to derive a divisional cost of equity from a firm's total cost of capital. Two practically used, heuristic-based approaches are tested and a significant relationship is found between one of the measures and CAPM beta. This method may offer a plausible and comparatively uncomplicated method for adjusting a firm's total cost of capital for divisional use. |
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