Financial Leverage the Capital Asset Pricing Model and the Cost of Equity Capital

Case Analysis

Demonstrates how the capital asset pricing model used to estimate the effects of financial leverage on the cost of equity. The levered betas and unlevering shown. Also, a methodology for the decomposition of the cost of equity into its three components – the risk free rate, a premium for the company, and a premium for financial risk.

Demonstrates how the capital asset pricing model used to estimate the effects of financial leverage on the cost of equity. The levered betas and unlevering shown. Also, a methodology for the decomposition of the cost of equity into its three components – the risk free rate, a premium for the company, and a premium for financial risk
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David W. Mullins Jr.
12 pages.
Release date: 01 March, 1980. Prod #: 280100-PDF-ENG
Indebtedness, the Capital Asset Pricing Model and the Cost of Equity Capital HBR case solution