Valuation and the Cost of Capital - Required Returns on Equity
8 important questions on Valuation and the Cost of Capital - Required Returns on Equity
How do you calculate Re?
What is β? Where does it depend on?
- The business risk of the firm
- The financial risk of the firm (leverage)
What is the difference called between β [Rm - Rf]?
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What is a defensive investment?
How to increase equity?
- Don't pay dividends.
- Ask stockholders to increase its capital, because if the company would increase its stocks, the value goes down.
What are three characteristics of preferred stockholders?
- They earn a certain percentage.
- They have certain requirements.
- They get paid first.
What is an advantage and a disadvantage of being a common stockholder?
How will an increase in financial leverage affect a company's cost of equity capital? How will it affect a company's equity beta?
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