This calculation is based on a variable market rate of return and a risk free rate. Using a variable market rate of return may be appropriate in comparing companies assuming the market rate is risk-adjusted.
CAPM would calculate Sony’s current cost of equity at 2.148%
RE = RF + Beta(RM – RF)
RE = 20% + 1.48(8.50% – 20%)
RE = 2.148%
This calculation is based on a variable market rate of return and a risk free rate. Using a
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