scholarly journals How to Determine the Cost of Capital for a Commercial Forestry

2022 ◽  
Vol 72 (1) ◽  
pp. 21-28
Author(s):  
Karlo Beljan ◽  
Denis Dolinar ◽  
Donald Hodges
Keyword(s):  
Risk Premium ◽  
Cost Of Capital ◽  
Stock Exchange ◽  
For Profit ◽  
Average Return ◽  
Risk Characteristics ◽  
Us Government ◽  
The Difference ◽  
Risk Free Rate ◽  
The Cost

Abstract This paper focuses on designing a methodological workflow to fill a knowledge gap for determining the cost of capital for commercial forestry projects. Upon reviewing the literature, a method to determine the cost of capital for profit-oriented forestry seems to be lacking. Accordingly, we selected and analyzed 42 companies that do businesses worldwide, are present on the stock exchange, and possess or lease forest land. Based on their business activities (growing forest, sawmilling, final production, paper production), these companies are classified into four subgroups. An algorithm has been devised using the concept of risk diversification and the capital asset pricing model for three groups of investors and four forestry subgroups. In doing so, the real risk-free rate (0.43%) is set as the difference between an average return on 10-year US government bonds (2.59% nominal) and the 10-year average US inflation rate (2.16%). The measure of forestry systematic risk (beta coefficient) varies between 0.83 and 1.41, while the equity (stock exchange market) risk premium is set to 6%. Unsystematic risk is determined using a process of mapping which takes into account all risk elements marked as relevant for the forestry sector. This approach provides results that reveal the cost of capital varying between 5.41% and 16.55% based on the current level of an investor's portfolio diversification and the risk characteristics of the forestry subgroup. Finally, the forestry companies meeting the investor's expectations are noted as preferable investment opportunities.

scholarly journals Endowments, fiscal federalism and the cost of capital for states: evidence from Brazil, 1891–1930

2010 ◽  
Vol 17 (1) ◽  
pp. 13-50 ◽  
Author(s):  
André C. Martinez Fritscher ◽  
Aldo Musacchio
Keyword(s):  
Risk Premium ◽  
Fiscal Federalism ◽  
Cost Of Capital ◽  
State Level ◽  
Export Prices ◽  
Brazilian Government ◽  
Per Capita ◽  
The Difference ◽  
Risk Free Rate ◽  
The Impact

There is a large literature that aims to explain what determines country risk (defined as the difference between the yield of a sovereign's bonds and the risk free rate). In this article, we contribute to the discussion by arguing that an important explanatory factor is the impact that commodities have on the capacity to pay. We use a newly created database with state-level fiscal and risk premium data (between 1891 and 1930) to show that Brazilian states with natural endowments that allowed them to export commodities that were in high demand (e.g. rubber and coffee) ended up having higher revenues per capita and lower cost of capital. We also explain that the variation in revenues per capita was both a product of the variation in natural endowments (i.e. the fact that states cannot produce any commodity they want) and a commodity boom that had asymmetric effects among states. These two effects generated variation in revenues per capita at the state level thanks to the extreme form of fiscal decentralisation that the Brazilian government adopted in the constitution of 1891, which gave states the sole right to tax exports. We also run instrumental variable estimates using indices of export prices for each state. These estimates confirm our findings that states with commodities that had higher price increases had lower risk premia.

scholarly journals The Impact of CEOs' Compensations on Cost Stickiness in Industrial Companies Listed on the Amman Stock Exchange

2021 ◽  
Vol 15 (1) ◽  
pp. 152
Author(s):  
Lina Fuad Hussien
Keyword(s):  
Stock Exchange ◽  
Industrial Companies ◽  
Level Of Activity ◽  
Cost Behavior ◽  
Study Population ◽  
The Difference ◽  
High Level ◽  
The Cost ◽  
The Impact ◽  
Cost Stickiness

The purpose of this study is to analyze the asymmetry in cost behavior (cost stickiness) and to identify the impact of CEOs' compensation on the degree of cost stickiness behavior. The study population consists of the public shareholding companies listed on the ASE, which number (56) industrial company. Data were collected from (35) industrial companies for the period (2009 - 2019). To measure the degree of costs stickiness, The Model of Weiss (2010) was used. The Model of Weiss (2010) takes into account the costs and changes in the level of activity (sales) for the last four quarters of the company, Weiss (2010) model constructs the difference in logarithmic ratios of changes in cost. The study found that the CEO's compensation in Jordanian industrial companies consists of two forms. The companies pay fixed salaries or performance-related bonuses. The study found that the form of compensation that is paid to the CEO affects the behavior of managers. The results indicated that the performance-related rewards are accompanied by a decrease in the level of cost stickiness, and the compensation paid in the form of fixed salaries are accompanied by a high level of cost stickiness. The study recommends that companies should understand the role of the compensation form in administrative decisions, especially with regard to resource modifications, as management motives in relation to resource modifications must be taken into account because of their clear and direct impact on the cost structure of companies.

scholarly journals PENGARUH DETERMINAN STRUKTUR MODAL TERHADAP NILAI PERUSAHAAN (Studi Kasus Pada Perusahaan Properti Di Bursa Efek Indonesia)

2014 ◽  
Vol 2 (2) ◽  
Author(s):  
Murtianingsih .
Keyword(s):  
Capital Structure ◽  
Firm Size ◽  
Cost Of Capital ◽  
Size Structure ◽  
Stock Exchange ◽  
Business Risk ◽  
Growth Opportunity ◽  
Property Companies ◽  
Equity Ratio ◽  
The Cost

MurtianingsihProgram Pascasarjana Magister Manajemen UMME-mail:[email protected] research was to know the effect of profitability, firm size, liquidity, structure asset, businessrisk, and cost of capital to capital structure at property simultaneously listed on IndonesiaStock Exchange and to know the variable which have partial effect to the capital structure.The research was taken place at Indonesia Stock Exchange Economics Faculty ofMuhammadiyah University Malang. Respondent are 21 property companies listed in IndonesiaStock Exchange. Purposive sampling was used to determine companies during five-years.Secondary data was taken between the year of 2006 up to 2010. Multiple regression analysisused to know the effect of profitability, firm size, liquidity, structure asset, business risk, andcost of capital to capital structure with 5 % of significance. The result of simultaneously regression(F test) exemplify that the variable profitability, firm size, structure asset, growthopportunity, liquidity, the cost of capital, business risk had significant effects to the capitalstructure of 21 property companies listed in Indonesia Stock Exchange. While the test of partialregression (t test), for the variable of profitability, growth opportunity, liquidity, cost ofcapital had effects to capital structure of property companies listed in Indonesia Stock Exchange,except the firm size, business risk, structure asset have no significant effects to thecapital structure of the property companies.Keyword: Debt to equity ratio, company size, profitability, growth, business risk and asset structure,cost of capital, liquidity

scholarly journals Biaya Modal Perusahaan di Indonesia: Tanggung Jawab Sosial dan Tata Kelola Perusahaan

2021 ◽  
Vol 26 (3) ◽  
pp. 361
Author(s):  
A. Firmansyah, A. F. Andriyani, M. L. Mahrus, W. Febrian, P. H. Jadi
Keyword(s):  
Corporate Governance ◽  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Cost Of Capital ◽  
Stock Exchange ◽  
Hypothesis Test ◽  
Linear Regression Analysis ◽  
Annual Reports ◽  
Corporate Social ◽  
The Cost

The high capital cost indicates the company's risk to obtain funding from debt and equity. The test in this study aims to prove the association between corporate social responsibility and corporate governance with the cost of capital. This study employs data sourced from financial reports and annual reports of the listed companies on the Indonesia Stock Exchange, downloaded from www.idx.co.id. In addition, this research data also employs stock price information sourced from finance.yahoo.com. The sample selection in this study used purposive sampling with a total sample of 260 observations from 65 companies from 2016 to 2019. The hypothesis test in this study used multiple linear regression analysis for panel data. This study concludes that corporate governance is positively associated with the cost of capital, while corporate social responsibility is negatively associated with the cost of capital. This study suggests that Indonesia's capital market supervisory authority needs to improve its governance policies and governance oversight mechanisms for companies listed on the Indonesia Stock Exchange.

scholarly journals Pengaruh Disclosure dan Manajemen Laba terhadap Cost of Capital

2020 ◽  
Vol 10 (1) ◽  
pp. 56
Author(s):  
Tri Kurniawati ◽  
Nadia Ayu Rifani Putri
Keyword(s):  
Real Estate ◽  
Earnings Management ◽  
Multiple Regression ◽  
Significant Influence ◽  
Cost Of Capital ◽  
Stock Exchange ◽  
The Real ◽  
Purposive Sampling ◽  
The Real Estate ◽  
The Cost

This study is aimed to analyze the influence of disclosure and earnings management on cost of capital. The population of this study is the real estate companies which is listed at the Indonesia Stock Exchange (IDX) and the sample is determined by purposive sampling. The samples consist of 28 companies in 2013-2015. Disclosure is measured by Disclosure Index, earnings management is measured by discretionary accrualls and cost of capital is estimated by EBO model. The research hypotheses are tested by using multiple regression. The results of this research indicate that (1) disclosure has no significant influence on the cost of capital, and (2) earnings management has positive and significant influence on cost of capital.

scholarly journals How leverage can improve performance

2020 ◽  
Vol 83 ◽  
pp. 01031
Author(s):  
Miroslav Kmeťko ◽  
Eduard Hyránek
Keyword(s):  
Risk Premium ◽  
Expected Returns ◽  
Tax Rates ◽  
Expected Return ◽  
Tax Rate ◽  
Equity Ratio ◽  
Risk Free Rate ◽  
The Cost ◽  
Managed Portfolios ◽  
The Impact

One of the best-known Capital Asset Pricing Model (CAP/M) provides us with a methodology for measuring the relationship between the risk premium and the impact of leverage on expected returns. However, this model is not used only to value the cost of capital but also to evaluate the performance of managed portfolios. We will test how the expected return changes in percent by changing the debt-equity ratio and the tax rate based on following assumptions: market return 7%, risk-free rate of return 1% and beta 1.2. These assumptions will be constant and we will change the debt-equity ratio and tax rate. Based on these results, it is clear that the change in profitability varies, in relation to the change of the DE ratio by one tenth. As for changes I n tax rates, changes in expected profitability are not entirely in direct proportion to these changes.

scholarly journals The Cost of Capital for Investment in the Warsaw Stock Exchange Indexes – Versus Djia

2021 ◽  
Vol 21 (1) ◽  
pp. 122-143
Author(s):  
Stanisław Urbański
Keyword(s):  
Confidence Interval ◽  
Cost Of Capital ◽  
Stock Exchange ◽  
Bootstrap Method ◽  
Market Returns ◽  
Investment Projects ◽  
Warsaw Stock Exchange ◽  
The Cost ◽  
Stock Indexes ◽  
The Bootstrap Method

Abstract Research background and purpose: The CAPM, Fama-French and modified Fama-French models were used to estimate the cost of the capital of the DJIA and selected Polish stock indexes were used. The estimated cost of capital was the cost of the portfolio of corporate investment projects estimated by market returns. Research methodology: The model tests were run on 276 monthly returns of stocks listed on the markets in the years 1995–2019. The bootstrap method to estimate the confidence interval of the cost of capital was used. Results: The highest and positive cost of capital median was found for the DJIA index, about 0.85% monthly, and for the WIG20 and WIGDIV indexes, about 0.25% monthly. The cost of capital median for the mWIG80, WIGBANK and WIGCHEMIA indexes were found to be negative. This was due to large errors in the estimated cost of capital. Novelty: Minor errors in the estimation of the cost of capital of index DJIA may result from a more rational policy for the implementation of investment projects by companies included in the index.

scholarly journals Development of the Risk Accumulation Method for Calculating the Capitalization Rate

2021 ◽  
pp. 7-14
Author(s):  
Nikolai Yu. Trifonov
Keyword(s):  
Risk Adjustment ◽  
Risk Premium ◽  
Stock Exchange ◽  
Country Risk ◽  
Monetary Unit ◽  
Capitalization Rate ◽  
Country Risk Premium ◽  
Risk Free Rate ◽  
The Relationship ◽  
Free Rate

Risk build-up method is the most used for calculating the capitalization rates. With the help of the literature analysis, the origin of this method is considered. The method was based on the relationship between risk and profitability of a stock in exchange trading, proven statistically. Later, when formulating the build-up method, this idea was transferred without any justification to the valuation of enterprises that do not list their securities on stock exchange. In other words, the formulas traditionally used in the application of the build-up method are empirical in nature and not precise.It is more accurate to write them down by analogy with Irwin Fisher's equation of returns. Based on the principle of dependence, one of the main ones for the valuation procedure, the essence of which is that the value of the valuation subject depends on its economic location, a set of four independent risks is given for use in the build-up method in general case: risk-free rate, country risk premium, branch risk premium, and subject risk adjustment. It is noted that the numerical value of these parameters used in the method fundamentally depends on the monetary unit used in the calculation (the valuation currency). Recommendations are given on finding a risk-free rate for various currencies, on calculating country risk premium, branch risk premium, and subject risk adjustment. The article is intended for academics, lecturers, and practitioners in such areas as corporate finance, business microeconomics, valuation, and investment analysis.

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