TY - JOUR
N2 - The corporate cost of capital is used by valuators to discount future flows of income from an entity in order to derive a present-day, forward-looking value of that entity. The cost of capital is therefore determined as the weighted cost of the various sources of funding, being typically equity, debt and preference instruments. The tricky and important part is estimating the cost of equity, which usually needs the application of finance models. The study on the texts on mineral valuation or mineral project evaluation demonstrates that the capital asset pricing model (CAPM) is a general model for estimating the cost of equity. However, according to shortfalls and problems relating to it a relatively similar and simpler model i.e. the single-index market model is proposed. The single index market model is an important tool in contemporary research in finance. Much of the importance of the model follows from its 'beta' parameter which, ideally, measures the sensitivity of returns on a security to changes in a market model. To estimate the cost of equity of the mining and cement companies listed in Tehran Stock Exchange (TSE) The single-index market model is selected because of the shortfalls and problems of the CAPM as well as the lack of commercial services for determining the market premium. The regression analysis as well as the statistical analysis is carried out using Excel spreadsheet. The statistic significance of the model is tested using t and F test statistics. The results showed that the independent variable (the rate of return on the market index) has a genuine effect on the dependent variable (the rate of return for the stock) and there is a statistically significant linear relationship between the two variables at significance level of 5%. Finally, the cost of equity formining and cement companies is estimated 25.0% and 31.0% respectively. Knowing the cost of equity, calculating the discount rate will not be very difficult.
L1 - http://journals.pan.pl/Content/119223/PDF/taheri-i-inni.pdf
L2 - http://journals.pan.pl/Content/119223
PY - 2011
IS - No 2
EP - 188
KW - cost of equity
KW - cost of capital
KW - Single-index market model
KW - CAPM
KW - TSE
A1 - Taheri, Mohsen
A1 - Irannajad, Mehdi
A1 - Ataee-Pour, Majid
PB - Komitet Zrównoważonej Gospodarki Surowcami Mineralnymi PAN
PB - Instytut Gospodarki Surowcami Mineralnymi i Energią PAN
DA - 2011
T1 - Estimation of the cost of equity for mining and cement industries by single-index market model
T1 - Szacowanie kosztu kapitału własnego dla zakładów górniczych i cementowni w jednowskaźnikowym modelu rynku
SP - 169
UR - http://journals.pan.pl/dlibra/publication/edition/119223
T2 - Gospodarka Surowcami Mineralnymi - Mineral Resources Management
ER -