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RISK‐ADJUSTED DISCOUNT RATES‐EXTENSIONS FROM THE AVERAGE‐RISK CASE
Author(s) -
Harris Robert S.,
Pringle John J.
Publication year - 1985
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1985.tb00406.x
Subject(s) - valuation (finance) , economics , econometrics , actuarial science , weighted average cost of capital , cost of capital , debt , risk premium , presentation (obstetrics) , financial economics , economic capital , finance , microeconomics , profit (economics) , individual capital , medicine , radiology
This paper provides an approach for developing risk‐adjusted discount rates that follows naturally from the standard presentation of the weighted average cost of capital. In addition to examining the implied assumptions about the valuation of corporate debt, the paper shows the pedagogic advantages of the proposed approach.