Andrew Stolz

AUGUST 5, 2020

If an investor moves money from the risk-free asset into the stock market, they should expect to earn a return in excess of the risk-free rate, what is called an equity risk premium. What Impacts the Capital Asset Pricing Model? Investments are exposed to two types of risk: systematic and unsystematic.

Risk-free Rate 52

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

Valutico

FEBRUARY 27, 2024

Different types of discount rates such as risk-free rate, cost of equity, or cost of debt, are used contextually in financial analysis. In DCF analysis, the Weighted Average Cost of Capital (WACC), representing the average return required by all stakeholders, is commonly used as the discount rate.

Discounted Cash Flow 52

Discounted Cash Flow Risk Premium Risk-free Rate Beta 52

Valutico

AUGUST 30, 2023

Cost of Equity and Capital: The Terminal Growth Rate is used to calculate the cost of equity in the Dividend Discount Model (DDM) and the cost of capital in the Weighted Average Cost of Capital (WACC) formula.

Terminal Value 98

Terminal Value Dividends Weighted Average Cost of Capital Discounted Cash Flow 98

Andrew Stolz

MARCH 20, 2020

Weight average cost of capital (WACC) is a calculation of a firm’s cost of capital which includes all sources of capital such as common stocks, preferred stocks, and bonds. A firm uses a mix of equity and debt to minimize the cost of capital.

Beta 52

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

Valutico

OCTOBER 20, 2022

d is the discount rate (which is usually the weighted average cost of capital (WACC), r in our previous example). Ce = Cost of Equity. Rf = Risk-free Rate. Rm – Rf) = Equity Market Risk Premium. Cp = Cost of Equity Premium. Ce = Cost of Equity.

Discounted Cash Flow 52

Discounted Cash Flow Terminal Value Weighted Average Cost of Capital Net Present Value 52