Title Valuation of Plant & Machinery – III.pdf ✅

Terminology for Valuation by Income Approach  Beta: a measure of systematic risk of a stock; the tendency of a stock’s price to correlate with changes in a specific index.  Business Enterprise: a commercial, industrial, service, or investment entity (or a combinationthereof) pursuingan economicactivity.  Business Risk: the degree of uncertainty of realizing expected future returnsof the business resulting from factors other than financial leverage.  Capital Structure: the composition of the invested capital of a business enterprise; the mix of debt and equity financing.  Cash Flow: cash that is generated over a period of time by an asset, group of assets,or business enterprise. 2 Valuation of Plant & Machinery - III

Terminology for Valuation by Income Approach  Risk-Free Rate: the rate of return available in the market on an investment free of default risk.  Risk Premium: a rate of return added to a risk-free rate to reflect risk.  Terminal Value: the value as of the end of the discrete projection period in a discountedfuture earnings model.  Weighted Average Cost of Capital: the cost of capital (discount rate) determined by the weighted average, at market value, of the cost of all financing sources in the business enterprise’scapital structure.  Capital Asset Pricing Model: a model in which the cost of capital for any stock or portfolio of stocks equals a risk-free rate plus a risk premium that is proportionateto the systematic risk of the stock or portfolio. 4 Valuation of Plant & Machinery - III