| Autor: Katarzyna Byrka-Kita | 133 |
Strony: 133-144
pełen tekst
BUILD-UP APPROACH AS A COST OF CAPITAL VALUATION METHOD
Summary
The concept of the cost of capital historically has served three purposes: as an investment decision criterion, as a hurdle rate in capital budgeting and as a link between fi nancial and investment decisions. At the time being the scope of the cost of capital application is substantially wider because the competence in this area is necessary in the process of fi rms’ valuations which are conducted for various reasons (buy and sell transactions, restructuring, taxes). In the article there was presented a build-up approach as a method to derive discount rates. This approach uses a series of factors taken from four basic categories to rate various operating attributes of the subject entity: competition, fi nancial strength, management ability and depth and fi nally profi tability and stability of earnings.
pełen tekstBUILD-UP APPROACH AS A COST OF CAPITAL VALUATION METHOD
Summary
The concept of the cost of capital historically has served three purposes: as an investment decision criterion, as a hurdle rate in capital budgeting and as a link between fi nancial and investment decisions. At the time being the scope of the cost of capital application is substantially wider because the competence in this area is necessary in the process of fi rms’ valuations which are conducted for various reasons (buy and sell transactions, restructuring, taxes). In the article there was presented a build-up approach as a method to derive discount rates. This approach uses a series of factors taken from four basic categories to rate various operating attributes of the subject entity: competition, fi nancial strength, management ability and depth and fi nally profi tability and stability of earnings.