Estimating SMEs Cost of Equity Using a Value at Risk Approach [electronic resource] : The Capital at Risk Model /
Beltrame, F.author.
Cappelletto, R.author.
Toniolo, G.author.
As well as reviewing traditional models, this book proposes an alternative model for estimating the cost of risk capital. This model, known as CaRM (Capital at Risk Model), bases the cost estimate of risk capital on VaR (Value at Risk) for the very first time. This book is an ideal resource for developing valuation research in SMEs.
Description based upon print version of record.
Cover; Half-Title; Title; Copyright; Dedication; Contents; List of Tables; List of Figures; Acknowledgements; About the Authors; Introduction; 1 The Financial Structure of Small and Medium Firms and the Impact on the Cost of Capital; 1.1 Introduction; 1.2 Literature review; 1.3 Capital markets and growth: the equity gap; 1.4 Business financing: a framework of reference; 1.5 Options for growth and cost of capital; 1.6 Conclusions; 2 Valuation of Small and Medium Enterprises: Critical Aspects of Method and Evaluation of Credit Risk; 2.1 Valuation of the firm
2.2 The valuation of small and medium enterprises: critical aspects2.2.1 The comparable approach: stock market multiples; 2.2.2 The comparable approach: correction of the Beta; 2.2.3 Excess debt; 2.2.4 The liquidity of the investment; 2.2.5 Critical aspects of use; 2.3 Cost of debt and cost of equity: a comparison; 2.4 Models for debt pricing used in estimating the cost of equity; 2.4.1 Probability of default; 2.4.2 Loss given default; 2.4.3 The models for estimating the cost of equity; 2.5 Unexpected losses in equity returns; 2.5.1 Value at Risk; 2.5.2 Pricing unexpected loss
3 The Capital at Risk Model: Theoretical Aspects3.1 Unlevered firms and totally levered firms; 3.2 The Value at Risk Approach for pricing; 3.3 Determination of the expected returns through a structural model; 3.3.1 The expected returns by creditors for the levered firm; 3.3.2 The required return by creditors for the totally levered firm; 3.4 Determination of expected returns on debt: a practical example; 3.4.1 Expected returns on debt for the levered firm; 3.4.2 Expected returns on debt for the totally levered firm; 3.5 Expected returns for levered firms
3.5.1 The model for estimation of the cost of equity without risky debt3.5.2 Model for estimation of the cost of equity with risky debt; 3.5.3 The general formula for quantification of the cost of equity: an example; 3.6 The Capital at Risk Model with corporate taxes; 3.7 Corollary: optimal capital structure; 4 Application of the Capital at Risk Model to Small and Medium Enterprises; 4.1 The unlevered firm: expected returns; 4.2 The capital at risk; 4.2.1 Probability distribution of the operating earnings and the returns; 4.2.2 The historical ROCE probability distribution
4.2.3 The construction of future scenarios to determine capital at risk4.3 The loss rate for the shareholders; 4.4 Cost of debt; 4.5 Cost of capital for the indebted firm; 4.6 The Capital at Risk Model: an example; 4.6.1 Cost of equity for unlevered firms and without taxation; 4.6.2 The cost of the third-party capital; 4.6.3 The cost of the equity capital for the levered firm; 4.6.4 The model with corporate tax; 5 The Capital at Risk Model Applied to the Firms Alpha, Beta and Gamma; 5.1 Introduction: objectives and presentation of the ADI rating; 5.2 Alpha; 5.2.1 Qualitative analysis
5.2.2 Economic-financial analysis
Includes bibliographical references and index.
As well as reviewing traditional models, this book proposes an alternative model for estimating the cost of risk capital. This model, known as CaRM (Capital at Risk Model), bases the cost estimate of risk capital on VaR (Value at Risk) for the very first time. This book is an ideal resource for developing valuation research in SMEs.
Corporations-Finance.
Capital market.
Banks and banking.
Business enterprises-Finance.
Corporate Finance.
Capital Markets.
Banking.
Business Finance.