Corporate Finance on Practive

Fin Article Summary
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Fin Article Summary
The results from Graham and Harvey (2002) article on corporate finances practice reveal several aspects that are consistent with finance theory and other issues which cannot align with the current business curriculum in schools. The results are a reflection of the chief financial officer’s opinions and beliefs and their feedback about using particular evaluation approaches. In regards to capital budgeting, the outcomes suggest that most companies have adopted the academic theory, and they rely on net present value (NPV) and discounted cash flow (DCF) methods to analyze new projects.
The results also show that the Capital Asset Pricing Model (CAPM) is the most common method for approximating the rate of equity capital (73.5%) (Graham & Harvey, 2002). The second common method was the average stock of return, and the third most common method was multifactor CAPM. Few organizations used a dividend discount approach to reduce the cost of equity. Public entities were also most likely to rely on CAPM in comparison to priva...