The cost of capital and the capital asset pricing model (CAPM) are used to review and value investments. The cost of capital is the interest rate paid on funds used for business activities, while CAPM assesses risk versus return. They help companies select projects with strong financial returns, but cannot account for unexpected external factors. […]
The capital asset pricing model (CAPM) is a formula used to determine the value relationship between risk premium and expected return for a capital asset. It is essential for assessing the feasibility of investing in shares and determining the systemic or market risk of an investment. Several economists contributed to its development, and Markowitz, Sharpe, […]
