Cost of Capital ( Equity Only)

Cost of Capital
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Khalid Mahmood, Saudi Arabia

Cost of Capital ( Equity Only)

We recently were required to calculate a charge in order to determine the economic value added. We used CAPM to calculate the cost of equity. We are a debt free company. Since we are not a listed company so we took the beta of the comparable listed companies and used that in the CAPM. Treasury bills return was used for risk free rate. The overall return of the market was used for "return". The market return has to be lower or at par with the expected growth in GDP.

 

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