Cost of Capital Workbook

by Shannon P. Pratt

Proven, practical techniques for estimating the cost of capital
"I would recommend Cost of Capital and the companion Cost of Capital Workbook as excellent tools for passing the various professional exams that lead to valuation accreditations and designations."
-James R. Hitchner, Phillips Hitchner Group, Inc., Atlanta, Georgia
"As a discussion leader for the AICPA ABV exam review course, this set of questions is perfect for people to use for practice for that exam and others (ASA and NACVA from my experience), for that matter. The mix of formats, including exercises, is great."
-Ronald L. Seigneur, Seigneur & Company, PC, CPAs, Lakewood, Colorado
"The exercises are particularly good."
-Stephen J. Bravo, Apogee Business Valuations, Framingham, Massachusetts
Cost of capital estimation has long been recognized as one of the most critical elements in business valuation, capital budgeting, feasibility studies, and corporate finance decisions-it is also, however, one of the most difficult procedures to perform and assess. The Cost of Capital Workbook will help financial officers of small, midsize, and even multibillion dollar companies estimate required rates of return and tackle the myriad issues associated with cost of capital. It will also help business valuation professionals of all levels to gain a greater understanding of cost of capital concepts and procedures.
Using hands-on exercises designed to implement procedures described in Cost of Capital, Second Edition, the Cost of Capital Workbook provides a deeper understanding of cost of capital problems by offering a practical experience in applying solutions. The Workbook includes multiple choice, true or false, and fill-in-the-blank questions as well
* Exercises estimating cost of capital by the build-up model and the Capital Asset Pricing Model
* Exercises using Ibbotson Associates' Stocks, Bonds, Bills, and Inflation Valuation Edition Yearbook
* Applications using discounted cash flow (DCF) methods, based on forecasted earnings and cash flows
* Examples covering valuing a business by both equity and invested capital procedures, making project selections, and utility-rate determinations
* Numerous exercises using Ibbotson data from the Cost of Capital Workbook
Business appraisers, corporate finance officers, CPAs, and attorneys will find the Cost of Capital Workbook an indispensable guide to the effective estimation and application of cost of capital.

168 pages, Paperback

First published October 25, 2002

About the author

Dr. Shannon P. Pratt, CFA, FASA, ARM, ABAR, MCBC, CM&AA, is a well-known authority in the field of business valuation and has written numerous books that articulate many of the concepts used in modern business valuation around the world. He is Chairman and CEO of Shannon Pratt Valuations, Inc., a business valuation firm headquartered in Portland, Oregon. He is also a member of the board of directors of Paulson Capital Corporation, an investment banking firm that specializes in small cap IPOs.

Dr. Pratt is the author of Valuing a Business: The Analysis and Appraisal of Closely Held Companies (5th edition, 2007), and the co-author of Valuing Small Businesses and Professional Practices (3rd edition) published by McGraw-Hill. He is the co-author with Roger Grabowski of Cost of Capital: Applications and Examples (2008), the co-author with Jay Fishman and William Morrison of Standards of Value, author of The Market Approach to Valuing Businesses (2nd edition), Business Valuation Body of Knowledge, Business Valuation Discounts and Premiums, and co-author with the Honorable David Laro of Business Valuation and Taxes: Procedure, Law and Perspective, all published by John Wiley & Sons, and The Lawyer's Business Valuation Handbook, published by the American Bar Association. He is also co-author of Guide to Business Valuations (17th edition), published by Practitioners Publishing Company.

* Source: Shannon Pratt Valuations website