Andrew Stolz

AUGUST 5, 2020

Definition of Capital Asset Pricing Model. It helps an investor understand what to expect to earn in relation to the risk-free rate and the market return. CAPM assumes that the minimum a rational investor would earn is the risk-free rate by buying the risk-free asset. beta of a stock). E(r) = Rf + ??(Rm

Risk-free Rate 52

Risk-free Rate Beta Weighted Average Cost of Capital Risk Premium 52

Andrew Stolz

AUGUST 5, 2020

Definition of the Cost of Equity. To compensate for the risks that shareholders take, firms pay them in return. Risk-free rate . The systematic risk of the security (Beta). Where R(e) = expected return on investment, Rf = risk-free rate, Rm = expected return of the market, and ?? beta of a stock.).

Equity 52

Equity Risk-free Rate Dividends Beta 52

Andrew Stolz

AUGUST 6, 2020

Definition of Modern Portfolio Theory. A theory presented in 1952 by Harry Markowitz on how risk-averse investors can create portfolios to maximize the return on investments based on the optimal levels of risk. Beta is the risk statistic used to compare the portfolio’s exposure to systematic risk to that of the market.

Beta 52

Beta Covariance Systematic Risk Marketability 52

Equidam

APRIL 22, 2025

10] , [23] , [2] Discount Rate: The rate used to discount future cash flows is typically the cost of equity, calculated via the Capital Asset Pricing Model (CAPM): Cost of Equity = Risk-Free Rate + Beta * Market Risk Premium. [23] 23] Collectively, rising interest rates and increased market risk lead to higher discount rates.

Discounted Cash Flow 64

Discounted Cash Flow Terminal Value Marketability EBITDA 64