Evaluation of the cost of capital and the discount rate based on the Russian financial statistics
The cost of capital and the discount rate calculated on its basis are the key parameters in the financial modelling and assessment of investment projects’ economic efficiency. Therefore, the method for their evaluation is always a relevant issue for economists and financiers all over the globe. In c...
| Main Authors: | , |
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| Format: | Article |
| Language: | Russian |
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Ural State University of Economics
2023-04-01
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| Series: | Journal of New Economy |
| Subjects: | |
| Online Access: | https://jne.usue.ru/en/issues-2023/1272 |
| _version_ | 1797848048277127168 |
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| author | Dmitry S. Voronov Lyudmila A. Ramenskaya |
| author_facet | Dmitry S. Voronov Lyudmila A. Ramenskaya |
| author_sort | Dmitry S. Voronov |
| collection | DOAJ |
| description | The cost of capital and the discount rate calculated on its basis are the key parameters in the financial modelling and assessment of investment projects’ economic efficiency. Therefore, the method for their evaluation is always a relevant issue for economists and financiers all over the globe. In conditions of unprecedent sanctions pressure this problem has gained special significance for Russian investors, for whom the assets denominated in ‘unfriendly’ currencies have ceased to be risk-free. The study aims to develop an algorithm for evaluating the cost of capital and calculating the discount rate based on ruble-denominated risk-free assets and Russian financial statistics. The methodological basis of the research is the theories of corporate finance and investment project design, as well as the portfolio theory. The statistics of the Russian stock market for 2003–2022 are studied using general scientific (systems analysis and synthesis) and econometric methods, as well as by adopting the Capital Asset Pricing Model (CAPM) and weighted average cost of capital (WACC). The paper suggests and tests a step-by-step algorithm for collecting and processing the Russian financial statistics to calculate the cost of capital and risk premiums to it. The findings prove that unsystematic risks should be assessed separately, rather than within the weighted average cost of capital, as well as propose a determined mechanism for this. The developed method allows avoiding the prohibitively high values of the cost of capital that arise during the use of foreign sources of information. |
| first_indexed | 2024-04-09T18:21:05Z |
| format | Article |
| id | doaj.art-8465283b8d5443c3b92d2c6843c96bc8 |
| institution | Directory Open Access Journal |
| issn | 2658-5081 2687-0002 |
| language | Russian |
| last_indexed | 2024-04-09T18:21:05Z |
| publishDate | 2023-04-01 |
| publisher | Ural State University of Economics |
| record_format | Article |
| series | Journal of New Economy |
| spelling | doaj.art-8465283b8d5443c3b92d2c6843c96bc82023-04-12T07:46:06ZrusUral State University of EconomicsJournal of New Economy2658-50812687-00022023-04-01241508010.29141/2658-5081-2023-24-1-3Evaluation of the cost of capital and the discount rate based on the Russian financial statisticsDmitry S. Voronov 0Lyudmila A. Ramenskaya1Technical University of UMMC, Verkhnyaya Pyshma, Sverdlovsk oblast, RussiaUral State University of Economics, Ekaterinburg, RussiaThe cost of capital and the discount rate calculated on its basis are the key parameters in the financial modelling and assessment of investment projects’ economic efficiency. Therefore, the method for their evaluation is always a relevant issue for economists and financiers all over the globe. In conditions of unprecedent sanctions pressure this problem has gained special significance for Russian investors, for whom the assets denominated in ‘unfriendly’ currencies have ceased to be risk-free. The study aims to develop an algorithm for evaluating the cost of capital and calculating the discount rate based on ruble-denominated risk-free assets and Russian financial statistics. The methodological basis of the research is the theories of corporate finance and investment project design, as well as the portfolio theory. The statistics of the Russian stock market for 2003–2022 are studied using general scientific (systems analysis and synthesis) and econometric methods, as well as by adopting the Capital Asset Pricing Model (CAPM) and weighted average cost of capital (WACC). The paper suggests and tests a step-by-step algorithm for collecting and processing the Russian financial statistics to calculate the cost of capital and risk premiums to it. The findings prove that unsystematic risks should be assessed separately, rather than within the weighted average cost of capital, as well as propose a determined mechanism for this. The developed method allows avoiding the prohibitively high values of the cost of capital that arise during the use of foreign sources of information.https://jne.usue.ru/en/issues-2023/1272capital asset pricing model (capm)weighted average cost of capital (wacc)discount rateinvestment projectrisk-free assetrisk assessment |
| spellingShingle | Dmitry S. Voronov Lyudmila A. Ramenskaya Evaluation of the cost of capital and the discount rate based on the Russian financial statistics Journal of New Economy capital asset pricing model (capm) weighted average cost of capital (wacc) discount rate investment project risk-free asset risk assessment |
| title | Evaluation of the cost of capital and the discount rate based on the Russian financial statistics |
| title_full | Evaluation of the cost of capital and the discount rate based on the Russian financial statistics |
| title_fullStr | Evaluation of the cost of capital and the discount rate based on the Russian financial statistics |
| title_full_unstemmed | Evaluation of the cost of capital and the discount rate based on the Russian financial statistics |
| title_short | Evaluation of the cost of capital and the discount rate based on the Russian financial statistics |
| title_sort | evaluation of the cost of capital and the discount rate based on the russian financial statistics |
| topic | capital asset pricing model (capm) weighted average cost of capital (wacc) discount rate investment project risk-free asset risk assessment |
| url | https://jne.usue.ru/en/issues-2023/1272 |
| work_keys_str_mv | AT dmitrysvoronov evaluationofthecostofcapitalandthediscountratebasedontherussianfinancialstatistics AT lyudmilaaramenskaya evaluationofthecostofcapitalandthediscountratebasedontherussianfinancialstatistics |