Abstract

SAN ANDRES REYES, Pablo Ricardo; JIMBER DEL RIO, Juan Antonio; MARQUEZ SANCHEZ, Fidel  and  VERGARA ROMERO, Arnaldo. Hybrid and avant-garde methods for cost of capital evaluation. Universidad y Sociedad [online]. 2023, vol.15, n.4, pp. 482-489.  Epub Aug 12, 2023. ISSN 2218-3620.

Nowadays, some capital budgeting techniques have been analyzed by investors in order to make investment decisions because risk takers usually evaluate some techniques, such as the return for projects, net present value for forecasted cash flows, the real-time that an investment can be recuperated, finance variables for sensitivity analysis, and cost of equity. Some methodologies exist; the most common ones are Capital Asset Pricing Model (CAPM) and Gordon´s Wealth Growth model. So, evaluating the cost of equity is essential for risk analysis, but in recent years, some have written articles about hybrid and avant-garde methods that complement the analysis of cost-of-equity techniques. The research aims to show the importance of applying those methodologies that benefit international investors and finance scientific researchers who strive to develop advances in theories and models for the cost of equity evaluation. The methodology was bibliographic because it was necessary to investigate recent articles about those methods. Articles information was taken from the Web of Science database from 2017-2021. The number of articles selected was based on convenience sampling. The study shows the recent articles that have applied Hybrid and avant-garde methods in evaluating the cost of equity. Also, the purpose of each investigation and the explanation of the use of those methodologies.

Keywords : Capital budgeting techniques; Cost of equity; Weighted Average of Capital; Risk analysis; Hybrid and avant-garde methods.

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