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Changes on financial markets caused by subprime crisis in the United States and related problems in the real sphere of many European economies have initiated a discussion on the factors of business value, also in the area of methods of determining the cost of equity. Known and commonly used, especially on poorly developed markets, methods in the period of a traditional business cycle required many adjustments. This situation could have caused
increase in the role of subjective factors in business valuation. The article, apart from known methods, presents a new concept of determining the cost of equity, adequate to the present turbulent market conditions. It allows determining more precisely the cost of equity of
companies operating in the conditions of unstable economies. In these economies the use of known methods of calculating the cost of equity is either impossible or requires the application of many adjustments that often do not guarantee correct result. An advantage of the presented method over other models (even Bond Yield Plus) is that risk premium, related to investments in equity, is determined in a manner preventing discretional adoption of its
amount. The previous practice indicates that often the amount of this premium was determined at a level expected by the customers. The proposed method limits impact of subjective factors on business value, which often distort the actual business value.
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