Determining the Discount Rate: The Case of Oil Industry in Serbia

Kočović, Jelena and Paunović, Mihailo and Jovović, Marija (2016) Determining the Discount Rate: The Case of Oil Industry in Serbia. Ekonomika preduzeća: mesečni časopis Društva ekonomista Srbije, 44 (5-6). pp. 371-381. ISSN 0353-443X

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Abstract

The paper presents theoretical and methodological aspects of determining
the discount rate on the example of NIS, as the largest energy company
in Serbia and one of the largest in Southeast Europe. The total cost of
capital which represents the weighted average of equity and long-term
debt costs is used as discount rate. The cost of equity capital is calculated
using the CAPM which, despite all its limitations, is still theoretically the
most correct and frequently used model in practice. The average cost
of long-term debt capital to the company NIS is equal to 14.773%, the
cost of equity capital is 12.453% and the total cost of capital, WACC, is
12.505%. The main component of the cost of equity capital is the risk
premium of investing in Serbia. The results show that macroeconomic
stability strengthening and adequate management of borrowed funds
can contribute to reduction of the total cost of capital in the Serbian
oil industry.

Item Type:	Article
Additional Information:	COBISS.ID=227240204
Uncontrolled Keywords:	discount rate, WACC, cost of equity, CAPM, country risk premium
Research Department:	Innovation Economics
Depositing User:	Jelena Banovic
Date Deposited:	23 Sep 2021 08:52
Last Modified:	11 Oct 2021 12:49
URI:	http://35.240.28.64/id/eprint/1644
Author Links:	[error in script] No links available.

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