The Cost of Equity Capital on Developing Equity Markets: Estimations for Selected Slovene Companies

Abstract

The Cost of Equity Capital on Developing Equity Markets: Estimations for Selected Slovene CompaniesThe article sheds light on the estimation of the cost of equity capital on a developing equity market. The cost of equity is important; it is crucial in capital budgeting decisions and performance evaluation. It determines the minimum yield the investors require on the invested capital and we use it as a discount rate to calculate the present value of the expected free cash flows to equity. The aim of this paper is to tackle the estimation of the cost of equity capital on developing markets with the example of estimation for ten Slovene publicly traded companies. The estimated cost of capital for the selected Slovene companies is between 9,7% and 13,7%.