Cost of capital for public vs private companies — Flashcards

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Cost of capital for public vs private companies — Flashcards

10 flashcards

Read Study Notes Questions

Factors affecting cost of capital and debt. Top Down:

Estimate cost of debt for publicly traded debt

Two approaches to estimating the cost of equity of a foreign company?

What is the rental price of capital?

Discount rate for equity =

How are earnings considered adequate?

Estimate cost of debt on non-traded

3-Factor Fama French model to estimate cost of equity

Build-up approach for cost of equity

#10

What is interest expense?

Cost of capital for public vs private companies CFA Flashcards - Medical Study Cards

Master Cost of capital for public vs private companies with Oncourse flashcards. These spaced repetition flashcards are designed for medical students preparing for NEET PG, USMLE Step 1, USMLE Step 2, MBBS exams, and other medical licensing examinations.

Cost of capital for public vs private companies Flashcard Deck - 10 Cards

Flashcard 1: Factors affecting cost of capital and debt. Top Down:

Answer: - capital availability: developed countries (stable currency )in a better spot than undeveloped (shadow banking) - market conditions: inflation, interest rates, state of economy - legal & regulatory, country risk: common-law better than civil-law - tax jurisdictions: higher marginal tax rate -> greater tax benefit of using debt

Flashcard 2: Estimate cost of debt for publicly traded debt

Answer: - YTM for longest maturity straight debt outstanding - if thinly traded, go with yield on the shorter maturity debt

Flashcard 3: Two approaches to estimating the cost of equity of a foreign company?

Answer: 1. country risk premium 2. expanded CAPM

Flashcard 4: What is the rental price of capital?

Answer: marginal cost of capital (r)

Flashcard 5: Discount rate for equity =

Answer: \= R + π + θ + λ + κ λ: credit spread\ π: expection inflation\ θ: inflation premium\ κ: risk premium for equity vs. risky debt

Flashcard 6: How are earnings considered adequate?

Answer: can cover company's cost of capital

Flashcard 7: Estimate cost of debt on non-traded

Answer: - matrix pricing (interpolated yield) - if debt not credit rated, use interest coverage ratio or financial leverage to infer - if rate on existing bank debt not useful, use leases - if leases undisclosed, use the incremental borrowing rate (the rate on a new secured loan over the same term)

Flashcard 8: 3-Factor Fama French model to estimate cost of equity

Answer: required return = rf + ERP + SMB + HML\ SMB: size premium (avg. difference in return of small caps over large-caps)\ HML: value premium (avg. difference in return of high book to mkt over low book to mkt portfolios)

Flashcard 9: Build-up approach for cost of equity

Answer: required return = rf + ERP + SP + SCRP\ ERP: calculated using a mkt-cap weighted index (no beta used)

Flashcard 10: What is interest expense?

Answer: financing cash flow to bond holders that is available to the firm before it makes any payments to its capital suppliers

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Cost of capital for public vs private companies Flashcards for CFA

Study 10 flashcards on Cost of capital for public vs private companies for CFA Corporate Finance (Level II). These active recall cards cover the key concepts, clinical associations, and high-yield facts from this chapter of Cost of Capital: Advanced Topics. Each card is designed to test your understanding rather than just recognition, building stronger and more durable memories for exam day.

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There are 10 flashcards for Cost of capital for public vs private companies, covering the key concepts, clinical correlations, and high-yield facts from this chapter of Cost of Capital: Advanced Topics.

How should I use these flashcards for CFA?

Read through each prompt and try to answer before revealing the back of the card. This active recall approach builds stronger memories than passive reading. Combine flashcards with the study notes and MCQ practice for the best results.

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Yes. This page covers one chapter of Cost of Capital: Advanced Topics. Visit the topic page to see all chapters and their flashcards under Corporate Finance (Level II).

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