Hi everyone!
I've found some discussions around negative cost of equity for companies with negative beta and so with cost of debt > cost of equity, but it seems unrealistic and there haven't been any real answers.
So how would you calculate Cost of Equity for a company with a negative Beta?
Thank you!
| +427 | Don’t work at UBS - UBS Sucks | 37 | 15h |
| +327 | Article - UBS’ Investment Bank Keeps Losing Ground | 41 | 3d |
| +151 | Should My Intern Get a Return Offer? | 50 | 14s |
| +61 | When to Leave Office as Intern | 8 | 5d |
| +60 | Best IB Group Overall? | 35 | 3h |
| +54 | F*ck it I'm Going to Med School | 19 | 9h |
| +39 | Would you rather be a Touse Squid or a Bouse Mogger in IB | 2 | 4d |
| +37 | What do you say to ppl who don’t know EVR/LAZ/CVP/PJT | 29 | 7h |
| +31 | STEM student lost in London IB recruiting | 17 | 3d |
| +27 | [HELP REQUESTED]: Take A2A Promo or Go Corp Dev | 12 | 2h |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
Really interested to have the answer too.
Are there actual companies with negative betas?
Do a wacc buildup from comps
Find comps. Find unlevered betas. Exclude the negative ones. Use the median. Then relever
Thanks!
Sometimes companies with a negative correlation to the market can have negative betas. Gold companies could be an example. Essentially, you are expected to earn less than the risk-free rate when you buy the stock. Of course, this also means that your discount rate will be super low as well.
After a quick check gold companies don't seem to have a negative beta. It is close to 0 in some cases yes but not negative.
I think you are mixing gold the asset, which has a negative beta, and gold mining companies, which have positive betas (it seems from a quick search) comprised between 0.0-0.5.
Thanks for pointing that out. Makes sense.
.
Fugiat perspiciatis alias at cupiditate. Tempore quibusdam natus nulla molestiae accusamus. Dicta perspiciatis consectetur molestiae voluptatum.
Sed dolores dolorem illum officia optio. Minus adipisci enim sed officiis. Voluptatum quisquam qui eveniet quasi earum corrupti ullam. Qui possimus ut temporibus.
Quisquam atque magnam et asperiores. Pariatur at est perferendis harum. Debitis error quia molestiae ut enim neque atque. Esse cum ducimus numquam eaque. Recusandae minima cumque impedit et qui nam qui omnis. Quas quibusdam dolore eos.
Quos libero numquam aut. Error reprehenderit id molestiae laborum dolores ab. Possimus id non pariatur.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...