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TABLE OF CONTENTS
Unit 6: Corporate Valuation Risk
(Continued)
Summary................................................................................... 6-30
Practice Exercise 6.3 .......................................................................... 6-31
Beta ........................................................................................... 6-33
Summary................................................................................... 6-37
Practice Exercise 6.4 .......................................................................... 6-39
Symbols and Definitions ..................................................................... 6-41
Risk vs. Return...................................................................................... 6-42
Required Rate of Return.......................................................... 6-42
Capital Asset Pricing Model (CAPM).................................... 6-45
Practice Exercise 6.5 .......................................................................... 6-49
Unit Summary....................................................................................... 6-53
Unit 7: Corporate Valuation Cost of Capital
Introduction...............................................................................................7-1
Unit Objectives ........................................................................................7-1
Sources of Capital and Their Costs......................................................7-1
Cost of Debt ................................................................................7-2
Cost of Preferred Stock .............................................................7-3
Cost of Common Stock (Equity)................................................7-4
Dividend Valuation Model.............................................. 7-5
Capital Asset Pricing Model (CAPM)........................... 7-6
Summary......................................................................................7-8
Practice Exercise 7.1 .............................................................................7-9
Weighted Average Cost of Capital.........................................7-15
Capital Structure ...........................................................7-17
Flotation Costs ..............................................................7-18
Summary....................................................................................7-19
Practice Exercise 7.2 ...........................................................................7-21