Andrew Stolz

AUGUST 5, 2020

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. What Impacts the Capital Asset Pricing Model? E(r) = Rf + ??(Rm

Risk-free Rate 52

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

Equilest

JANUARY 3, 2023

The theory suggests that the expected return on an asset can be modeled as a linear function of various macroeconomic factors or "factor loadings" that affect the asset's risk, such as market risk, industry risk, and country risk. First, we need to estimate the factor loadings for each risk factor.

Risk Premium 40

Risk Premium Risk-free Rate Market Risk Finance 40

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] Risk-Free Rate: Tied to government bond yields (e.g.,

Discounted Cash Flow 64

Discounted Cash Flow Terminal Value Marketability EBITDA 64

Equidam

APRIL 22, 2025

Discount Rates / Risk Premiums: The discount rate used in DCF analysis (often the WACC) incorporates elements sensitive to market conditions. [21] 21] [22] [24] [27] The cost of equity component includes the market risk premium the excess return investors expect for investing in the broader market over a risk-free rate.

Discounted Cash Flow 52

Discounted Cash Flow Marketability Risk Premium Start-ups 52