Valuation Handbook — 2023 Summary Edition

<!DOCTYPE html>    <html lang="en" dir="ltr" prefix="og: https://ogp.me/ns#">  <head> <script type="text/javascript"> var digitalData = {"pageInstanceID":"research:foundation:2024:valuation-handbook-2023-prod","page":{"pageInfo":{"pageID":"research:foundation:2024:valuation-handbook-2023","pageName":"research:foundation:2024:valuation-handbook-2023"},"category":{"primaryCategory":"Public:research"}}}; </script> <meta charset="utf-8" /> <meta name="description" content="This guide will help practitioners evaluate investments and capital projects globally by providing a good understanding of the cost of capital." /> <link rel="canonical" href="https://rpc.cfainstitute.org/research/foundation/2024/valuation-handbook-2023" /> <meta name="citation_title" content="Valuation Handbook — International Guide to Cost of Capital: 2023 Summary Edition" /> <meta name="citation_doi" content="10.56227/24.1.6" /> <meta name="citation_publication_date" content="2024/3/29" /> <meta property="og:site_name" content="CFA Institute Research and Policy Center" /> <meta property="og:type" content="Generic Content" /> <meta property="og:title" content="Valuation Handbook — 2023 Summary Edition" /> <meta property="og:description" content="This guide will help practitioners evaluate investments and capital projects globally by providing a good understanding of the cost of capital." /> <meta name="Generator" content="Drupal 10 (https://www.drupal.org)" /> <meta name="MobileOptimized" content="width" /> <meta name="HandheldFriendly" content="true" /> <meta name="viewport" content="width=device-width, initial-scale=1.0" /> <script src="//assets.adobedtm.com/ca679de7f940/9200895aad6f/launch-7d16c76c0bd6.min.js" type="text/javascript" async></script> <link rel="stylesheet" href="https://fonts.googleapis.com/css?family=Roboto:400,500,700&display=swap" type="text/css" /> <link rel="icon" href="/themes/custom/cfa_rpc/favicon.png" type="image/png" /> <link rel="alternate" hreflang="en" href="https://rpc.cfainstitute.org/research/foundation/2024/valuation-handbook-2023" /> <title>Valuation Handbook — 2023 Summary Edition</title> <link rel="stylesheet" media="all" href="/sites/default/files/css/css_-95aU0v869f9qdRxH_PMtf_nLnmyMTNVNJ99lXQPcJ4.css?delta=0&language=en&theme=cfa_rpc&include=eJyNUtFuwyAM_KGk-STLIW6wRjDCTrv8_Qhh67pFat_Ax9nn45x4UpY4OPG9eVqoU3GMARaaGCFw_NDhf-nS3m5qtAwjKnWutYIKDXOQEUOvthXC3LkrQk6ulcvjEDApj0HcRxmeH_xdClAoPaLBfVO-b_M56CQacqR8Dk95TVV1XJ8eHCr3MhTxKaCRtmsKcBUxytBWrsuesJ0sSWIVkQyUjRqx289q68QCM8fh-do3V-RGOfNEeq58n3qO8IIzvdRT1nC5fJbBKJ9dwoxzxuR1OCy5PCqXNaZ1DKyeppdt3xuuSSzw7A085bI1lQ9iVww2POVG25mPn4gy0Q_rG76uIVRr78U1wEDZBo5sNVfV_sPk0vhG4lQPgDA7D5gYav1A-wq_2KKFp-bzzQB4wulPFlvUUPdI_Qrbc-ELV95owA" /> <link rel="stylesheet" media="all" href="https://static.cloud.coveo.com/atomic/v2/themes/coveo.css" /> <link rel="stylesheet" media="all" href="/sites/default/files/css/css_SkSCq4w1idOpZ6pPDAAWjtpFtVY7EKQ-mEujXyRc-oQ.css?delta=2&language=en&theme=cfa_rpc&include=eJyNUtFuwyAM_KGk-STLIW6wRjDCTrv8_Qhh67pFat_Ax9nn45x4UpY4OPG9eVqoU3GMARaaGCFw_NDhf-nS3m5qtAwjKnWutYIKDXOQEUOvthXC3LkrQk6ulcvjEDApj0HcRxmeH_xdClAoPaLBfVO-b_M56CQacqR8Dk95TVV1XJ8eHCr3MhTxKaCRtmsKcBUxytBWrsuesJ0sSWIVkQyUjRqx289q68QCM8fh-do3V-RGOfNEeq58n3qO8IIzvdRT1nC5fJbBKJ9dwoxzxuR1OCy5PCqXNaZ1DKyeppdt3xuuSSzw7A085bI1lQ9iVww2POVG25mPn4gy0Q_rG76uIVRr78U1wEDZBo5sNVfV_sPk0vhG4lQPgDA7D5gYav1A-wq_2KKFp-bzzQB4wulPFlvUUPdI_Qrbc-ELV95owA" /> <cohesion-placeholder></cohesion-placeholder> </head> <body class="path-node page-node-type-generic-content grid-wrapper"> <a href="#main-content" class="visually-hidden focusable skip-link"> Skip to main content </a> <div class="dialog-off-canvas-main-canvas" data-off-canvas-main-canvas> <input class="coh-inline-element ssa-component coh-component ssa-component-instance-2deda0ba-35c6-4be9-a864-fea3e44be036 coh-component-instance-2deda0ba-35c6-4be9-a864-fea3e44be036 megamenu__toggle-input" id="megamenu-toggle" type="checkbox"> <header class="coh-container ssa-component coh-component ssa-component-instance-2deda0ba-35c6-4be9-a864-fea3e44be036 coh-component-instance-2deda0ba-35c6-4be9-a864-fea3e44be036 site-header masthead--megamenu coh-style-header-light-theme header-position--relative menu-position-desktop--center menu-column-count-desktop-3 coh-style-focusable-content coh-ce-cpt_site_header-4f98e7c7" > <div class="coh-container masthead__header coh-ce-cpt_site_header-12991b17" > <label class="coh-inline-element megamenu__toggle coh-ce-cpt_site_header-a586471a" for="megamenu-toggle" aria-owns="masthead__menu"> <span class="coh-inline-element megamenu__toggle-icon"></span> <span class="coh-inline-element coh-style-screen-reader-only">Toggle Menu</span> </label> <a class="coh-inline-element masthead__branding" href="/" title="Research and Policy Center Home"> <div class="coh-container ssa-component coh-component ssa-component-instance-2deda0ba-35c6-4be9-a864-fea3e44be036 coh-component-instance-2deda0ba-35c6-4be9-a864-fea3e44be036 " > <div class="coh-block dark-title coh-ce-cpt_drupal_blocks-f4b9eee7"> <img src="/themes/custom/cfa_rpc/logo.svg" alt="Home" fetchpriority="high" /> </div> </div> </a> <search class="coh-inline-element masthead__search coh-ce-cpt_site_header-a586471a"> <span class="coh-inline-element masthead__search-container" id="coveo-search-form"> <atomic-search-interface id="global-search-box" search-hub="RPC-Site-Search-Hub" pipeline="RPC-Site-Search-Pipeline-Drupal"> <atomic-search-box redirection-url=/search textarea="false" disable-search="false"> <atomic-search-box-query-suggestions maxWithQuery="" maxWithoutQuery=""> </atomic-search-box-query-suggestions> </atomic-search-box> </atomic-search-interface> <script> (async () => { await customElements.whenDefined('atomic-search-interface'); await customElements.whenDefined('cfa-coveo-ui'); window.cfaCoveo.initSearchBox(); })(); </script> </span> </search> <ul class="coh-list-container coh-unordered-list masthead__items"> <li class="coh-list-item masthead__item toggle"> <input class="coh-inline-element toggle__input" id="account-toggle" type="checkbox"> <label class="coh-inline-element toggle__label" for="account-toggle" aria-owns="account__popover" tabindex="0"> <span class="coh-inline-element toggle__icon icon icon--account"></span> <span class="coh-inline-element coh-style-screen-reader-only">Account Management</span> </label> <div class="coh-container toggle__popover" id="account__popover" > <div class="coh-block"> <ul class="coh-list-container coh-unordered-list popover__items"> <li class="coh-list-item popover__item"> <a href="/Account/Login" class="coh-link popover__link js--oidc-menu-link" target="_self" > Log In </a > </li> <li class="coh-list-item popover__item"> <a href="/Account/CreateAccount" class="coh-link popover__link js--oidc-menu-link" target="_self" > Create an Account </a > </li> </ul> </div> </div> </li> </ul> </div> <div class="coh-container coh-ce-cpt_site_header-17f61934" > </div> <div class="coh-container coh-ce-cpt_site_header-bf88d758" > </div> <div class="coh-container masthead__menu coh-ce-cpt_site_header-a586471a" id="masthead__menu" > <div class="coh-block megamenu coh-ce-cpt_site_header-a586471a"> <div class="megamenu__navigation-groups"> <nav class="megamenu__navigation-group" aria-labelledby="Explore-rpc"> <span id="Explore-rpc" class="megamenu__navigation-group-header"> Explore </span> <ul class="megamenu__navigation-group-items"> <li class="megamenu__navigation-group-item"> <a href="/research" class="megamenu__link" data-drupal-link-system-path="node/88211">Research</a> </li> <li class="megamenu__navigation-group-item"> <a href="/policy" class="megamenu__link" data-drupal-link-system-path="node/88381">Policy</a> </li> <li class="megamenu__navigation-group-item"> <a href="/codes-and-standards" class="megamenu__link" data-drupal-link-system-path="node/88096">Industry Codes and Standards</a> </li> <li class="megamenu__navigation-group-item"> <a href="/research/financial-analysts-journal" class="megamenu__link" data-drupal-link-system-path="node/206">Financial Analysts Journal</a> </li> <li class="megamenu__navigation-group-item"> <a href="/gips-standards" class="megamenu__link" data-drupal-link-system-path="node/88246">GIPS Standards</a> </li> <li class="megamenu__navigation-group-item"> <a href="/research-foundation" class="megamenu__link" data-drupal-link-system-path="node/88391">Research Foundation</a> </li> <li class="megamenu__navigation-group-item"> <a href="/voices-of-influence" class="megamenu__link" data-drupal-link-system-path="node/88496">Voices of Influence</a> </li> <li class="megamenu__navigation-group-item"> <a href="/subscribe" class="megamenu__link" data-drupal-link-system-path="node/88506">Subscribe</a> </li> <li class="megamenu__navigation-group-item"> <a href="https://www.cfainstitute.org/" class="megamenu__link">CFA Institute</a> </li> <li class="megamenu__navigation-group-item"> <a href="/about" class="megamenu__link" data-drupal-link-system-path="node/88501">About Us</a> </li> </ul> </nav> <nav class="megamenu__navigation-group" aria-labelledby="Themes-rpc"> <span id="Themes-rpc" class="megamenu__navigation-group-header"> Themes </span> <ul class="megamenu__navigation-group-items"> <li class="megamenu__navigation-group-item"> <a href="/themes/resilience" class="megamenu__link megamenu__link--visual"> <img loading="lazy" src="/sites/default/files/styles/mega_menu_link_image/public/2024-12/branded_img_510430253.jpg?itok=b18fP8Lb" width="128" height="128" alt="Columns" class="megamenu__link-image" /> <span class="megamenu__link-label"> Resiliency of the Capital Markets </span> </a> </li> <li class="megamenu__navigation-group-item"> <a href="/themes/technology" class="megamenu__link megamenu__link--visual"> <img loading="lazy" src="/sites/default/files/styles/mega_menu_link_image/public/2024-12/branded_img_468785031.jpg?itok=dyHx7Rrp" width="128" height="128" alt="Notebook and tablet" class="megamenu__link-image" /> <span class="megamenu__link-label"> Technology, Big Data and AI </span> </a> </li> <li class="megamenu__navigation-group-item"> <a href="/themes/insights" class="megamenu__link megamenu__link--visual"> <img loading="lazy" src="/sites/default/files/styles/mega_menu_link_image/public/2024-12/branded_img_585050692.jpg?itok=vQtPUtj_" width="128" height="128" alt="Hands holding red rectangle" class="megamenu__link-image" /> <span class="megamenu__link-label"> Future of the Profession </span> </a> </li> <li class="megamenu__navigation-group-item"> <a href="/themes/sustainability" class="megamenu__link megamenu__link--visual"> <img loading="lazy" src="/sites/default/files/styles/mega_menu_link_image/public/2024-12/branded_img_579154694.jpg?itok=ZyyrFfgX" width="128" height="128" alt="Green leaves on white background" class="megamenu__link-image" /> <span class="megamenu__link-label"> Sustainable Investing </span> </a> </li> </ul> </nav> <nav class="megamenu__navigation-group" aria-labelledby="Topics-rpc"> <span id="Topics-rpc" class="megamenu__navigation-group-header"> Topics </span> <ul class="megamenu__navigation-group-items"> <li class="megamenu__navigation-group-item"> <a href="/topics/auditing-and-assurance" class="megamenu__link" data-drupal-link-system-path="node/88171">Auditing and Assurance</a> </li> <li class="megamenu__navigation-group-item"> <a href="/topics/digital-finance-and-cryptoassets" class="megamenu__link" data-drupal-link-system-path="node/88176">Digital Finance and Cryptoassets</a> </li> <li class="megamenu__navigation-group-item"> <a href="/topics/diversity-equity-and-inclusion" class="megamenu__link" data-drupal-link-system-path="node/88181">Diversity, Equity, and Inclusion (DEI) Research</a> </li> <li class="megamenu__navigation-group-item"> <a href="/topics/esg-investing-and-analysis" class="megamenu__link" data-drupal-link-system-path="node/88191">ESG Investing and Analysis</a> </li> <li class="megamenu__navigation-group-item"> <a href="/topics/financial-reporting" class="megamenu__link" data-drupal-link-system-path="node/88196">Financial Reporting</a> </li> <li class="megamenu__navigation-group-item"> <a href="/topics/index-investing-and-factor-strategies" class="megamenu__link" data-drupal-link-system-path="node/88201">Index Investing and Factor Strategies</a> </li> <li class="megamenu__navigation-group-item"> <a href="/topics/net-zero-investing" class="megamenu__link" data-drupal-link-system-path="node/88206">Net-Zero Investing </a> </li> <li class="megamenu__navigation-group-item"> <a href="/topics/new-gen-of-investors" class="megamenu__link" data-drupal-link-system-path="node/88256">New Generation of Young Investors</a> </li> <li class="megamenu__navigation-group-item"> <a href="/topics/pensions-and-retirement" class="megamenu__link" data-drupal-link-system-path="node/88261">Pensions and Retirement</a> </li> <li class="megamenu__navigation-group-item"> <a href="/topics/performance-attribution" class="megamenu__link" data-drupal-link-system-path="node/88266">Performance Measurement and Attribution</a> </li> <li class="megamenu__navigation-group-item"> <a href="/topics/portfolio-construction-and-investment" class="megamenu__link" data-drupal-link-system-path="node/88271">Portfolio Construction and Investment</a> </li> <li class="megamenu__navigation-group-item"> <a href="/themes/sustainability/sustainability-reporting" class="megamenu__link" data-drupal-link-system-path="node/88276">Sustainability Reporting</a> </li> </ul> </nav> <nav class="megamenu__navigation-group" aria-labelledby="More-rpc"> <span id="More-rpc" class="megamenu__navigation-group-header"> More </span> <ul class="megamenu__navigation-group-items"> <li class="megamenu__navigation-group-item"> <a href="/about/board-and-committees" class="megamenu__link" data-drupal-link-system-path="node/88341">Advisory Board and Committees</a> </li> <li class="megamenu__navigation-group-item"> <a href="/blogs-and-podcasts" class="megamenu__link" data-drupal-link-system-path="node/88216">Blogs and Podcasts</a> </li> <li class="megamenu__navigation-group-item"> <a href="/policy/comment-letters" class="megamenu__link" data-drupal-link-system-path="node/176">Comment Letters/Consultation Responses</a> </li> <li class="megamenu__navigation-group-item"> <a href="https://www.cfainstitute.org/ethics-standards" class="megamenu__link">Ethics for the Profession</a> </li> <li class="megamenu__navigation-group-item"> <a href="/research-foundation/investment-data-alliance" class="megamenu__link" data-drupal-link-system-path="node/88481">Investment Data Alliance</a> </li> <li class="megamenu__navigation-group-item"> <a href="/cdn-cgi/l/email-protection#acdec9dfc9cddecfc482dec9ddd9c9dfd8dfeccfcacdc5c2dfd8c5d8d9d8c982c3decb93dfd9cec6c9cfd891fec9dfc9cddecfc4899e9ce5c8c9cd" class="megamenu__link">Submit Your Research Ideas</a> </li> <li class="megamenu__navigation-group-item"> <a href="/research-foundation/donate" class="megamenu__link" data-drupal-link-system-path="node/88286">Support the Research Foundation</a> </li> <li class="megamenu__navigation-group-item"> <a href="https://www.systemicriskcouncil.org/" class="megamenu__link">Systemic Risk Council</a> </li> </ul> </nav> <div class="sr-only"> <label for="megamenu-toggle"> <button>Close menu</button> </label> </div> </div> </div> </div> </header> <div class="coh-container ssa-component coh-component ssa-component-instance-2deda0ba-35c6-4be9-a864-fea3e44be036 coh-component-instance-2deda0ba-35c6-4be9-a864-fea3e44be036" data-coh-match-heights="{"xl":{"target":"site-header.header-position--fixed","children":false}}" > </div> <div id="block-cfa-rpc-sitewidealert" class="settings-tray-editable" data-drupal-settingstray="editable"> <div><div data-sitewide-alert></div></div>  <div class="notice bottom-0 js-notice border-top border-warning" id="privacy-banner"> <div class="notice__banner bg-warning-lighter padding-y-sm inner-glow shadow-md"> <div class="coh-container-boxed"> <div class="flex justify-between items-center"> <p class="text-sm" style="margin-bottom: 0;">We're using cookies, but you can turn them off in your browser settings. Otherwise, you are agreeing to our use of cookies. Learn more in our <a href="/about/governance/policies/privacy-policy">Privacy Policy</a></p> <button class="reset notice__close-btn margin-left-sm js-notice__hide-control" id="closePrivacyWarning"> <svg class="icon--ch" viewBox="0 0 16 16"> <title>Accept</title> <g stroke-width="2" stroke="currentColor" fill="none" stroke-linecap="round" stroke-linejoin="round" stroke-miterlimit="10"> <line x1="13.5" y1="2.5" x2="2.5" y2="13.5"></line> <line x1="2.5" y1="2.5" x2="13.5" y2="13.5"></line> </g> </svg> </button> </div> </div> </div> </div> </div> <div class="coh-container content-grid stack-reset coh-ce-8c2c3d5e" > <section class="article-grid"> <div data-drupal-messages-fallback class="hidden"></div> </section> <section class="grid__item--bleed grid__item--themed theme--insights"> <div class="grid__item-container"> <nav role="navigation" aria-labelledby="system-breadcrumb" id="breadcrumb-nav"> <h2 id="system-breadcrumb" class="visually-hidden">Breadcrumb</h2> <ol class="breadcrumbs breadcrumbs--slash breadcrumbs--independent"> <li class=""> <a href="/">Research and Policy Center</a> </li> <li class=""> <a href="/research">Research</a> </li> <li class=""> <a href="/research-foundation">Research Foundation</a> </li> <li class="current-page"> Valuation Handbook — International Guide to Cost of Capital: 2023 Summary Edition </li> </ol> </nav> </div> </section> <article > <div class="coh-container grid__item--bleed spotlight-hero spotlight-hero--article theme--insights" > <picture class="spotlight-hero__image media__ratio--double media__ratio--triple-triple@md media__ratio--quad@lg media__ratio--quad-double-bleed@xl "> <source srcset="https://cfainstitute.widen.net/content/41d967d6-db94-4f85-97b8-20afe3110f87/web/building-captial-markets.jpg?w=2048&itok=D8PEurvQ" media="(min-width: 900px)" type="image/jpeg"> <source srcset="https://cfainstitute.widen.net/content/41d967d6-db94-4f85-97b8-20afe3110f87/web/building-captial-markets.jpg?w=1152&itok=LRMQSUbW" media="(min-width: 600px) and (max-width: 899px)" type="image/jpeg"> <source srcset="https://cfainstitute.widen.net/content/41d967d6-db94-4f85-97b8-20afe3110f87/web/building-captial-markets.jpg?w=568&itok=PU2ZU3tV" media="(max-width: 599px)" type="image/jpeg"> <img class="coh-image ssa-component coh-component coh-image-responsive-xl coh-image-responsive-sm coh-image-responsive-ps media__fit--none " loading="eager" src="https://cfainstitute.widen.net/content/41d967d6-db94-4f85-97b8-20afe3110f87/web/building-captial-markets.jpg?w=568&itok=PU2ZU3tV" alt="building-capital-markets" /> </picture> <div class="coh-container spotlight-hero__container" > <div class="coh-container spotlight-hero__content-container" > <div class="coh-container spotlight-hero__text spotlight__max-width-container" > <div class="coh-container spotlight-max-width-item spotlight-hero__theme theme--insights coh-ce-a586471a" > <span class="coh-inline-element spotlight-hero__theme-text">THEME: CAPITAL MARKETS</span> </div> <span class="coh-inline-element ssa-component coh-component ssa-component-instance-382b79ae-7ba4-457b-83ec-7e6e9077b3fc coh-component-instance-382b79ae-7ba4-457b-83ec-7e6e9077b3fc spotlight-hero__meta spotlight-max-width-item items--piped coh-ce-cpt_spotlight_hero_generic_meta-a586471a"> <span class="coh-inline-element items__item">29 March 2024</span> <span class="coh-inline-element items__item">Research Foundation</span> </span> <h1 class="coh-heading spotlight-hero__title spotlight-max-width-item" > Valuation Handbook — International Guide to Cost of Capital: 2023 Summary Edition </h1> <h2 class="coh-heading spotlight-hero__subtitle spotlight-max-width-item coh-ce-a586471a" > Published by CFA Institute Research Foundation </h2> </div> </div> </div> </div> <div class="coh-container content-grid" > <div class="coh-container article-grid" > <div class="coh-container grid__item--full-width grid__item--inset grid__item--initial" > <div class="coh-container grid__container grid__container--normal-column-gap" > <div class="coh-container grid__item--article-body" > <div class="coh-container authors__container grid__item--article-element" > <ol class="authors__list"> <li class="authors__item"> James P. Harrington </li> <li class="authors__item"> Carla Nunes, CFA </li> <li class="authors__item"> Anas Aboulamer </li> </ol> </div> <div class="coh-container share" > <span class="coh-inline-element">Share this:</span> <ul class="coh-list-container coh-unordered-list inline-list"> <li class="coh-list-item"> <a href="https://www.facebook.com/sharer/sharer.php?u=https://rpc.cfainstitute.org/research/foundation/2024/valuation-handbook-2023&t=Valuation Handbook — International Guide to Cost of Capital: 2023 Summary Edition" class="coh-link" target="_blank" > <i class="coh-inline-element icon icon--social-fb-alt"></i> <span class="coh-inline-element sr-only">Share on Facebook</span> </a> </li> <li class="coh-list-item"> <a href="https://service.weibo.com/share/share.php?url=https://rpc.cfainstitute.org/research/foundation/2024/valuation-handbook-2023&appkey=PUTAPPKEYHERE&title=Valuation Handbook — International Guide to Cost of Capital: 2023 Summary Edition&language=zh_cn" class="coh-link" target="_blank" > <i class="coh-inline-element icon icon--social-weibo-alt"></i> <span class="coh-inline-element sr-only">Share on Weibo</span> </a> </li> <li class="coh-list-item"> <a href="https://www.twitter.com/intent/tweet?url=https://rpc.cfainstitute.org/research/foundation/2024/valuation-handbook-2023&amp;text=Valuation Handbook — International Guide to Cost of Capital: 2023 Summary Edition" class="coh-link" target="_blank" > <i class="coh-inline-element icon icon--social-twitter-alt"></i> <span class="coh-inline-element sr-only">Share on Twitter (X)</span> </a> </li> <li class="coh-list-item"> <a href="https://www.linkedin.com/shareArticle?mini=true&url=https://rpc.cfainstitute.org/research/foundation/2024/valuation-handbook-2023&title=Valuation Handbook — International Guide to Cost of Capital: 2023 Summary Edition" class="coh-link" target="_blank" > <i class="coh-inline-element icon icon--social-li-alt"></i> <span class="coh-inline-element sr-only">Share on LinkedIn</span> </a> </li> <li class="coh-list-item"> <a href="/cdn-cgi/l/email-protection#82bdf1f7e0e8e7e1f6bfd4e3eef7e3f6ebedeca2cae3ece6e0edede9a2600216a2cbecf6e7f0ece3f6ebedece3eea2c5f7ebe6e7a2f6eda2c1edf1f6a2ede4a2c1e3f2ebf6e3eeb8a2b0b2b0b1a2d1f7efefe3f0fba2c7e6ebf6ebedeca4e3eff2b9e0ede6fbbfeaf6f6f2f1b8adadf0f2e1ace1e4e3ebecf1f6ebf6f7f6e7acedf0e5adf0e7f1e7e3f0e1eaade4edf7ece6e3f6ebedecadb0b2b0b6adf4e3eef7e3f6ebedecafeae3ece6e0edede9afb0b2b0b1" class="coh-link" target="_blank"> <i class="coh-inline-element icon icon--email"></i> <span class="coh-inline-element sr-only">Share by Email</span> </a> </li> </ul> </div> <div class="coh-container overview grid__item--article-element" > </div> <div class="coh-container grid__item--article-element" > <p class="coh-inline-element article-description"> </p> </div> <div class="coh-container overview grid__item--article-element" > <div class="tex2jax_process"><p>The cost of capital is the expected rate of return that the market requires to attract funds to an investment and is one of the most important concepts in finance. A good understanding of this is essential for making global investment decisions.</p> </div> </div> <div class="coh-container grid__item--article-element" > <a class="content-asset content-asset--primary" href="/sites/default/files/-/media/documents/article/rf-brief/2023-international-valuation-guide-to-cost-of-capital.pdf"> <span class="content-asset__type icon icon--asset-pdf "></span> <span class="content-asset__title"> <span class="content-asset__emphasis">Valuation Handbook — International Guide to Cost of Capital: 2023 Summary Edition</span> View PDF </span> </a> </div> <div class="coh-container grid__item--article-element book__cover-image article-cover coh-ce-a586471a" > <article class="media media--type-acquia-dam-image-asset media--view-mode-default"> <img src="https://cfainstitute.widen.net/content/7a9fb9ac-91e1-44f8-be62-aae0407c0ad0/web/Cover%20from%202023-International-Guide-to-Cost-of-Capital_CFA-Kroll-Final.jpg" width="1275" height="1650" alt="Valuation Handbook 2023" loading="lazy" /> </article> </div> <div class="coh-container grid__item--article-element coh-ce-a586471a" > <section class="grid__item--article-element"> <h2 class="article__title"> Overview </h2> <section class="grid__item--article-element"> <div class="tex2jax_process"><p>The cost of capital is the expected rate of return that the market requires in order to attract funds to a particular investment and is one of the most important concepts in finance. It may be described in simple terms as the expected return appropriate for the expected level of risk and is also commonly called the discount rate, the expected return, or the required return.</p> <p>There are three broad valuation approaches: (i) the income approach, (ii) the market approach, and (iii) the cost or asset-based approach. The country risk premia (CRPs), equity risk premia (ERPs), and relative volatility (RVs) can be used to develop cost of capital estimates for use in income-approach-based valuation methods. Of the three aforementioned approaches to estimating value, only the income approach typically requires cost of capital estimates.</p> </div> </section> </section> <section class="grid__item--article-body-float-right call-out theme--insights"> <a class="call-out__link" href="https://rpc.cfainstitute.org/research-foundation/donate"> <div class="coh-inline-element call-out__title"> </div> <div class="call-out__media"> <picture class="media__ratio--wide "> <source srcset="https://cfainstitute.widen.net/content/51f6c72a-3d38-4113-b77b-b354958fd8b3/web/RF%20ad%20for%20RPC%20site.png?w=568&itok=0wOrjhm8" media="(min-width: 900px)" type="image/png"> <source srcset="https://cfainstitute.widen.net/content/51f6c72a-3d38-4113-b77b-b354958fd8b3/web/RF%20ad%20for%20RPC%20site.png?w=568&itok=0wOrjhm8" media="(min-width: 600px) and (max-width: 899px)" type="image/png"> <source srcset="https://cfainstitute.widen.net/content/51f6c72a-3d38-4113-b77b-b354958fd8b3/web/RF%20ad%20for%20RPC%20site.png?w=568&itok=0wOrjhm8" media="(max-width: 599px)" type="image/png"> <img class="coh-image ssa-component coh-component coh-image-responsive-xl coh-image-responsive-sm coh-image-responsive-ps media__fit--cover media__ratio--wide " loading="lazy" src="https://cfainstitute.widen.net/content/51f6c72a-3d38-4113-b77b-b354958fd8b3/web/RF%20ad%20for%20RPC%20site.png?w=568&itok=0wOrjhm8" alt="Research Foundation Ad" /> </picture> </div> <div class="call-out__content"> <span class="call-out__cta"> Support Professional Excellence </span> <p class="call-out__description"> Support Research for the Global Investment Community. Your donation raises professional excellence and enables the foundation to continue its important mission to fund, publish, and distribute in-depth, high quality, independent research. </p> </div> </a> </section> <section class="grid__item--article-element"> <h2 class="article__title"> </h2> <section class="grid__item--article-element"> <div class="tex2jax_process"><p>The cost of capital is a critical input used in income approaches to equate the future economic benefits (typically measured by projected cash flows) of a business, business ownership interest, security, or intangible asset to present value. The income approach is most often applied through a discounted cash flow (DCF) model.</p> <p>A basic insight of capital market theory, that expected return is a function of risk, still holds when dealing with cost of equity capital in a global environment. Estimating a proper cost of capital (i.e., a discount rate) in developed countries, where a relative abundance of market data and comparable companies exist, requires a high degree of expertise. Estimating cost of capital in less-developed (i.e., “emerging”) economies can present an even greater challenge, primarily because of lack of data (or poor data quality) and the potential for magnified financial, economic, and political risks. A good understanding of cost of capital concepts is, therefore, essential for making global investment decisions.</p> </div> </section> </section> </div> <div class="coh-container grid__item--article-element article-meta__container pl-credit coh-ce-a586471a" > <div class="coh-container ssa-component coh-component ssa-component-instance-54ee4de3-9052-45a1-bc02-2cf24a4b1bd7 coh-component-instance-54ee4de3-9052-45a1-bc02-2cf24a4b1bd7 pl-credit coh-ce-cpt_pl_credit_box-a586471a" > <span class="coh-inline-element pl-credit__group"> <span class="coh-inline-element pl-credit__header coh-ce-cpt_pl_credit_box-a586471a">CFA Members Earn</span> <span class="coh-inline-element pl-credit__value coh-ce-cpt_pl_credit_box-a586471a">5.5PL</span> </span> <span class="coh-inline-element pl-credit__group"> <a href="/recordCredits/89731" class="coh-link pl-credit__record coh-ce-cpt_pl_credit_box-a586471a" target="_self" > Record PL credit </a> <a href="https://cpd.cfainstitute.org/continuing-education/summary" class="coh-link pl-credit__manage coh-ce-cpt_pl_credit_box-a586471a" target="_self" > Manage your Professional Learning credits </a> </span> <p class="coh-paragraph pl-credit__response coh-ce-cpt_pl_credit_box-e5661962" ></p> </div> </div> <div class="coh-container article-meta__container items grid__item--article-element" > <span class="coh-inline-element article-meta__header">Publisher Information</span> <div class="coh-inline-element"> <span class="coh-inline-element items__item">Research Foundation</span> <span class="coh-inline-element items__item"> </span> <span class="coh-inline-element items__item">doi.org/10.56227/24.1.6</span> </div> </div> <div class="coh-container" > </div> </div> </div> </div> </div> </div> </article> </div> <footer class="coh-container ssa-component coh-component ssa-component-instance-a0525d85-a8d2-4188-8381-fceef6f4a32f coh-component-instance-a0525d85-a8d2-4188-8381-fceef6f4a32f footer coh-style-footer-light-theme coh-style-focusable-content" > <div class="coh-container footer__preroll coh-ce-cpt_site_footer-a586471a" > <div class="coh-container footer__preroll-container" > <div class="coh-container footer__about" > <h2 class="coh-heading footer__about-header h3 coh-ce-a586471a" >About the Research and Policy Center (RPC)</h2> <p class="coh-paragraph footer__about-text coh-ce-a586471a" >CFA Institute Research and Policy Center is transforming research insights into actions that strengthen markets, advance ethics, and improve investor outcomes for the ultimate benefit of society.</p> <a href="/about" class="coh-link footer__about-cta button coh-ce-a586471a" target="_self" >Learn more about the RPC</a> </div> <div class="coh-container footer__latest" > <h2 class="coh-heading footer__latest-header h3 coh-ce-a586471a" >Stay informed on the latest from the RPC</h2> <p class="coh-paragraph footer__latest-text coh-ce-a586471a" >Sign up to get the latest updates from the RPC right to your inbox</p> <a href="/subscribe" class="coh-link footer__latest-cta button coh-ce-a586471a" target="_self" >Subscribe here</a> </div> </div> </div> <div class="coh-container footer__top coh-ce-cpt_site_footer-57fae9b8" > <div class="coh-container footer__logo cfa-font-weight-bold coh-ce-cpt_site_footer-a586471a" > <span class="coh-inline-element footer__logo-img coh-ce-cpt_site_footer-a586471a"></span> </div> <div class="coh-container footer__social-links coh-ce-cpt_site_footer-a586471a" > <ul class="coh-menu-list-container coh-unordered-list social-links"><li class="coh-menu-list-item" > <a href="https://www.linkedin.com/showcase/research-and-policy-center" data-coh-settings='{ "xl":{"link_interaction":"click-through-to-link"} }' class="coh-link icon--social-li coh-ce-a586471a js-coh-menu-item-link" target="_blank" title="Linkedin Page"> <span class="coh-inline-element icon--social-li footer__social-icon icon"></span> </a></li><li class="coh-menu-list-item" > <a href="https://www.facebook.com/CFAInstitute" data-coh-settings='{ "xl":{"link_interaction":"click-through-to-link"} }' class="coh-link icon--social-fb coh-ce-a586471a js-coh-menu-item-link" target="_blank" title="Facebook Page"> <span class="coh-inline-element icon--social-fb footer__social-icon icon"></span> </a></li><li class="coh-menu-list-item" > <a href="https://x.com/cfainstitute" data-coh-settings='{ "xl":{"link_interaction":"click-through-to-link"} }' class="coh-link icon--social-twitter coh-ce-a586471a js-coh-menu-item-link" target="_blank" title="Twitter Page"> <span class="coh-inline-element icon--social-twitter footer__social-icon icon"></span> </a></li><li class="coh-menu-list-item" > <a href="http://e.weibo.com/cfainst" data-coh-settings='{ "xl":{"link_interaction":"click-through-to-link"} }' class="coh-link icon--social-weibo coh-ce-a586471a js-coh-menu-item-link" target="_blank" title="Weibo Page"> <span class="coh-inline-element icon--social-weibo footer__social-icon icon"></span> </a></li><li class="coh-menu-list-item" > <a href="https://rpc.cfainstitute.org/ICE-Feeds/RPC-Publications-Feed" data-coh-settings='{ "xl":{"link_interaction":"click-through-to-link"} }' class="coh-link icon--social-rss coh-ce-a586471a js-coh-menu-item-link" target="_blank" title="Research and Policy Center RSS"> <span class="coh-inline-element icon--social-rss footer__social-icon icon"></span> </a></li></ul> </div> </div> <div class="coh-container footer__bottom" > <div class="coh-container footer__links coh-ce-cpt_site_footer-a586471a" > <ul class="coh-menu-list-container coh-unordered-list"><li class="coh-menu-list-item js-coh-menu-item" data-coh-settings='{"xl":"hidden"}' > <a href="https://www.cfainstitute.org/" data-coh-settings='{ "xl":{"link_interaction":"click-through-to-link"} }' class="coh-link coh-style-footer-light-theme js-coh-menu-item-link" >CFA Institute</a></li><li class="coh-menu-list-item js-coh-menu-item" data-coh-settings='{"xl":"hidden"}' > <a href="https://profile.cfainstitute.org/ContactUs" data-coh-settings='{ "xl":{"link_interaction":"click-through-to-link"} }' class="coh-link coh-style-footer-light-theme js-coh-menu-item-link" >Contact Us</a></li><li class="coh-menu-list-item js-coh-menu-item" data-coh-settings='{"xl":"hidden"}' > <a href="https://www.cfainstitute.org/utility/accessibility" data-coh-settings='{ "xl":{"link_interaction":"click-through-to-link"} }' class="coh-link coh-style-footer-light-theme js-coh-menu-item-link" >Accessibility</a></li><li class="coh-menu-list-item js-coh-menu-item" data-coh-settings='{"xl":"hidden"}' > <a href="https://www.cfainstitute.org/about/governance/policies/privacy-policy" data-coh-settings='{ "xl":{"link_interaction":"click-through-to-link"} }' class="coh-link coh-style-footer-light-theme js-coh-menu-item-link" >Privacy Policy</a></li><li class="coh-menu-list-item js-coh-menu-item" data-coh-settings='{"xl":"hidden"}' > <a href="https://www.cfainstitute.org/about/governance/policies/terms-conditions" data-coh-settings='{ "xl":{"link_interaction":"click-through-to-link"} }' class="coh-link coh-style-footer-light-theme js-coh-menu-item-link" >Terms & Conditions</a></li><li class="coh-menu-list-item js-coh-menu-item" data-coh-settings='{"xl":"hidden"}' > <a href="https://rpc.cfainstitute.org/utility/sitemap" data-coh-settings='{ "xl":{"link_interaction":"click-through-to-link"} }' class="coh-link coh-style-footer-light-theme js-coh-menu-item-link" >Sitemap</a></li></ul> </div> <div class="coh-container footer__copyright" > <div class="coh-wysiwyg footer__copyright coh-ce-cpt_site_footer-7d1a2a8" > <div class="tex2jax_process"><p><span style="-webkit-text-stroke-width:0px;background-color:rgb(250, 250, 250);color:rgb(102, 102, 102);display:inline !important;float:none;font-family:Lato, Arial, sans-serif;font-size:12px;font-style:normal;font-variant-caps:normal;font-variant-ligatures:normal;font-weight:400;letter-spacing:normal;orphans:2;text-align:center;text-decoration-color:initial;text-decoration-style:initial;text-decoration-thickness:initial;text-indent:0px;text-transform:none;white-space:normal;widows:2;word-spacing:0px;">© 2024 CFA Institute Research and Policy Center. All Rights Reserved.</span></p> </div> </div> </div> </div> </footer> </div> <script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script><script type="application/json" data-drupal-selector="drupal-settings-json">{"path":{"baseUrl":"\/","pathPrefix":"","currentPath":"node\/89731","currentPathIsAdmin":false,"isFront":false,"currentLanguage":"en","currentContentType":"generic_content"},"pluralDelimiter":"\u0003","suppressDeprecationErrors":true,"coveo":{"organization_id":"cfainstitute"},"rpcSiteSettings":{"URL":""},"user_roles":["anonymous"],"cfaData":{"partnerId":"","profileId":"","siteName":"CFA Institute Research and Policy Center","userRoles":["anonymous"],"pageUrl":"\/research\/foundation\/2024\/valuation-handbook-2023"},"clientside_validation_jquery":{"validate_all_ajax_forms":1,"force_validate_on_blur":true,"messages":{"required":"This field is required.","remote":"Please fix this field.","email":"Please enter a valid email address.","url":"Please enter a valid URL.","date":"Please enter a valid date.","dateISO":"Please enter a valid date (ISO).","number":"Please enter a valid number.","digits":"Please enter only digits.","equalTo":"Please enter the same value again.","maxlength":"Please enter no more than {0} characters.","minlength":"Please enter at least {0} characters.","rangelength":"Please enter a value between {0} and {1} characters long.","range":"Please enter a value between {0} and {1}.","max":"Please enter a value less than or equal to {0}.","min":"Please enter a value greater than or equal to {0}.","step":"Please enter a multiple of {0}."}},"cohesion":{"currentAdminTheme":"gin","front_end_settings":{"global_js":{"matchHeight":1,"parallax_scrolling":1,"cohMatchHeights":1}},"google_map_api_key":"","google_map_api_key_geo":null,"animate_on_view_mobile":null,"add_animation_classes":null,"responsive_grid_settings":{"gridType":"desktop-first","columns":12,"breakpoints":{"xl":{"width":1536,"innerGutter":32,"outerGutter":128,"widthType":"fixed","previewColumns":12,"label":"Television","class":"coh-icon-television","iconHex":"F26C","boxedWidth":1280},"lg":{"width":1198,"innerGutter":32,"outerGutter":64,"widthType":"fluid","previewColumns":12,"label":"Desktop","class":"coh-icon-desktop","iconHex":"F108","boxedWidth":1070},"md":{"width":900,"innerGutter":24,"outerGutter":48,"widthType":"fluid","previewColumns":12,"label":"Laptop","class":"coh-icon-laptop","iconHex":"F109","boxedWidth":804},"sm":{"width":767,"innerGutter":24,"outerGutter":48,"widthType":"fluid","previewColumns":6,"label":"Tablet","class":"coh-icon-tablet","iconHex":"F10A","boxedWidth":671},"ps":{"width":565,"innerGutter":24,"outerGutter":24,"widthType":"fluid","previewColumns":6,"label":"Mobile landscape","class":"coh-icon-mobile-landscape","iconHex":"E91E","boxedWidth":517},"xs":{"innerGutter":24,"outerGutter":24,"previewColumns":6,"label":"Mobile","class":"coh-icon-mobile","iconHex":"F10B","boxedWidth":272,"width":0,"widthType":"fluid","mobilePlaceholderWidth":320,"mobilePlaceholderType":"fluid"}}},"use_dx8":true,"sidebar_view_style":"titles","log_dx8_error":false,"error_url":"\/cohesionapi\/logger\/jserrors","dx8_content_paths":[["settings","content"],["settings","content","text"],["settings","markerInfo","text"],["settings","title"],["markup","prefix"],["markup","suffix"],["markup","attributes",["value"]],["hideNoData","hideData"],["hideNoData","hideData","text"]]},"mathjax":{"config_type":1,"config":{"tex2jax":{"inlineMath":[["\\(","\\)"]],"processEscapes":"true"},"showProcessingMessages":"false","messageStyle":"none"}},"collapsiblock":{"active_pages":false,"slide_speed":200,"cookie_lifetime":null},"sitewideAlert":{"refreshInterval":120000,"automaticRefresh":false},"user":{"uid":0,"permissionsHash":"c45de4c27998f5348f55ac900e95bfdfe8bbc4570f8a0a11ac345c1145913915"}}</script> <script src="/sites/default/files/js/js_lf0HqjqWlEjW-ZJnlkfxw1CRZcmJkpGeuJXl74F6g88.js?scope=footer&delta=0&language=en&theme=cfa_rpc&include=eJx9kVFywyAMRC9k19foT8-gkYViKwHECLnO8avUadr--IcZdpdFPAr6esX71Nm3NnRxhu5bEoWd54taAc5cuPr0s8_SfaALgjWalqwz5oE0Z2xd5qx0m0iNQ1q5i9ZnJI7Nhibc38L5QKf1nWVZvZ8kGxpG8R06WdwgdfkNP8cC59IyeqTDv52U7VKT7kfTWU2yrWEeQ93OYlJw4RcHag6LSQKkeH3gq0BaHaWy_Qu1DGScxGHW-8spmoLig_4uiQEzm09S5QD951eC7SfrtR86o9EK2AS-5cMc0bUIjZsMKommxwKYEiTuLhU9hvsC557FwA"></script> <script src="https://cdnjs.cloudflare.com/ajax/libs/mathjax/2.7.0/MathJax.js?config=TeX-AMS-MML_HTMLorMML"></script> <script src="/sites/default/files/js/js_Ot7znBY5OF-Co9WJ0aSnHzBvPqjyvqlPBxtkVLnrQug.js?scope=footer&delta=2&language=en&theme=cfa_rpc&include=eJx9kVFywyAMRC9k19foT8-gkYViKwHECLnO8avUadr--IcZdpdFPAr6esX71Nm3NnRxhu5bEoWd54taAc5cuPr0s8_SfaALgjWalqwz5oE0Z2xd5qx0m0iNQ1q5i9ZnJI7Nhibc38L5QKf1nWVZvZ8kGxpG8R06WdwgdfkNP8cC59IyeqTDv52U7VKT7kfTWU2yrWEeQ93OYlJw4RcHag6LSQKkeH3gq0BaHaWy_Qu1DGScxGHW-8spmoLig_4uiQEzm09S5QD951eC7SfrtR86o9EK2AS-5cMc0bUIjZsMKommxwKYEiTuLhU9hvsC557FwA"></script> <script src="https://cdn.jsdelivr.net/npm/js-cookie@3.0.5/dist/js.cookie.min.js"></script> <script src="/modules/contrib/collapsiblock/theme/dist/collapsiblock.js?srkmc9" type="module"></script> <script src="/sites/default/files/js/js_QI_8EO65USh2v8WxbXSWFM1TlWXtbiVCryG75ZUYr4M.js?scope=footer&delta=5&language=en&theme=cfa_rpc&include=eJx9kVFywyAMRC9k19foT8-gkYViKwHECLnO8avUadr--IcZdpdFPAr6esX71Nm3NnRxhu5bEoWd54taAc5cuPr0s8_SfaALgjWalqwz5oE0Z2xd5qx0m0iNQ1q5i9ZnJI7Nhibc38L5QKf1nWVZvZ8kGxpG8R06WdwgdfkNP8cC59IyeqTDv52U7VKT7kfTWU2yrWEeQ93OYlJw4RcHag6LSQKkeH3gq0BaHaWy_Qu1DGScxGHW-8spmoLig_4uiQEzm09S5QD951eC7SfrtR86o9EK2AS-5cMc0bUIjZsMKommxwKYEiTuLhU9hvsC557FwA"></script> <script src="https://static.cloud.coveo.com/atomic/v2/atomic.esm.js" type="module"></script> <script src="/modules/custom/cfa_search_api_coveo/js/dist/cfa-coveo-atomic-ui.js?srkmc9" type="module" id="my-coveo-initializer" async></script> <script src="/sites/default/files/js/js_IuflnMZdAoJoBdsoRYueXJW1R7McRRoPQap7BZlv6D4.js?scope=footer&delta=8&language=en&theme=cfa_rpc&include=eJx9kVFywyAMRC9k19foT8-gkYViKwHECLnO8avUadr--IcZdpdFPAr6esX71Nm3NnRxhu5bEoWd54taAc5cuPr0s8_SfaALgjWalqwz5oE0Z2xd5qx0m0iNQ1q5i9ZnJI7Nhibc38L5QKf1nWVZvZ8kGxpG8R06WdwgdfkNP8cC59IyeqTDv52U7VKT7kfTWU2yrWEeQ93OYlJw4RcHag6LSQKkeH3gq0BaHaWy_Qu1DGScxGHW-8spmoLig_4uiQEzm09S5QD951eC7SfrtR86o9EK2AS-5cMc0bUIjZsMKommxwKYEiTuLhU9hvsC557FwA"></script> </body> </html>

CINXE.COM

Valuation Handbook — 2023 Summary Edition