Risk sensitivity indicator as correction factor for cost of capital rate : 6th International Scientific Conference Managing and Modelling of Financial Risks, 10th-11th September 2012, Ostrava

Cost of capital rate is a result of risk included in cost of debt rates and cost of equity rates. Generally to estimate cost of capital rates with use of CAPM conception, is used information about general risk indicator, known as beta coefficient and relations between debt and equity rates. Such approach in unmodified version, falsely gives the similar results for enterprises from the same sector and with similar levels of debt to equity relations. In paper is presented risk sensitivity indicator conception which allows to differentiate cost of capital rate between more risk sensitive businesses and less sensitive businesses. -- risk sensitivity ; cost of capital ; enterprise value ; sensitivity indicator