Strategic Financial Management Part II Finance and Wealth Decisions

Robert Alan Hill
Strategic Financial Management:
Part II
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2

Robert Alan Hill
Strategic Financial Management: Part II
Finance & Wealth Decisions
Download free eBooks at bookboon.com
3

Strategic Financial Management: Part II: Finance & Wealth Decisions
1
st
edition
© 2010 Robert Alan Hill &
bookboon.com
ISBN 978-87-7681-571-4
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Strategic Financial Management: Part II
4
Contents
Contents
About the Author 7
Part One: e Finance Decision 8
1 Equity Valuation and the Cost of Capital 9
1.1 e Capitalisation Concept 9
1.2 Single-Period Dividend Valuation 10

1.3 Finite Dividend Valuation 10
1.4 General Dividend Valuation 11
1.5 Constant Dividend Valuation 11
1.6 e Dividend Yield and Corporate Cost of Equity 11
1.7 Dividend Growth and the Cost of Equity 12
1.8 Capital Growth and the Cost of Equity 14
1.9 Growth Estimates and the Cut-O Rate 15
1.10 Earnings Valuation and the Cut-O Rate 17
1.11 Summary and Conclusions 20
1.12 Selected References 20
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Strategic Financial Management: Part II
5
Contents

2 Debt Valuation and the Cost of Capital 21
2.1 Capital Gearing (Leverage): An Introduction 22
2.2 e Value of Debt Capital and Capital Cost 22
2.3 e Tax-Deductibility of Debt 25
2.4 e Impact of Issue Costs 28
2.5 Summary and Conclusions 31
3 Capital Gearing and the Cost of Capital 33
3.1 e Weighted Average Cost of Capital (WACC) 33
3.2 WACC Assumptions 35
3.3 e Real-World Problems of WACC Estimation 37
3.4 Summary and Conclusions 41
3.5 Selected Reference 42
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