Capital Asset Pricing Model as a Discount Rate Source - Essay Example

The methods included this model include the capital asset pricing model that was proposed by Sharpe in 1964 and other as well as the consumption based inter-temporal capital asset pricing models (CCAPM).... This will entail discussing the assumptions relating to the form of stochastic discount model as well as how the factor method is related to the acquiring of equilibrium risk premium.... This paper will outline how this method of valuing an asset fits to be a factor pricing model....

The paper "capital asset pricing model" discusses that CAPM is just a model, not an exact copy of the validity.... apital asset pricing model (CAPM), the model of an estimation of profitability of financial assets, forms a theoretical basis for some various financial technologies on management of profitableness and risk, applied at long-term and intermediate-term investment in stock.... The particular feature of the problem moreover consists in the fact that that service of this or that source manages to the company unequally....

An essay "Maritsa Plc's Using the capital asset pricing model" reports that the method of capital budgeting is widely used because of its recognition of the time value of money.... The capital asset pricing model (CAPM) is one of the most popular tools in finance which is used to determine a theoretically required rate of return of an asset, if that asset is added to an already well-diversified portfolio, given the asset's non-diversifiable risk.... Using the capital asset pricing model, the cost of capital is computed as: where: kc is the cost of capital; krf is the risk free rate; ß is the systematic risk of the common stock's return relative to the market as a whole; and km-krf is the market risk premium, which is equal to the difference in the expected rate of return for the market as a whole2....

The discount rate for obtaining the present value is some desired rate of return which may be equal to the cost of capital of a company.... Finance is the life blood of any business, because for undertaking any kind of activities, even major or minor, source of funds is playing a massive role.... As far as the Research and Development projects of Tesco plc is taken in to consideration, for the purpose of taking the better decision, the fundamental project evaluation techniques like Pay back period, ARR (Accounting or Average rate of Return), NPV (Net Present Value), or IRR (Internal rate of Return) is applicable....

This essay analyzes capital asset pricing model which is the best tool applied for assessing the related risk and the associated trade-offs with market returns.... CAPM stands for capital asset pricing model (CAPM) which is used for relating the risk and the associated trade-offs with market returns.... Practical Implementation of CAPM This pricing model which is regarded as CAPM was put forwarded in the year 1960 and since then it is under deep influence of criticisms....

The author of the assignment critically analyzes the capital asset pricing model (CAPM) and arbitrage pricing theory (APT) models.... It was in this background that the capital asset pricing model (CAPM) and the Arbitrage Pricing Theory (APT) came to be.... capital asset pricing model and the Arbitrage Pricing Theory both trace their beginning to the Modern Pricing Theory of Harry M.... According to Williams, the value of a stock should equal the present value of its future dividends, which is presently known as the dividend discount model of stock valuation....

The paper 'capital Budgeting and Risk' is a convincing example of a finance & accounting case study.... The paper 'capital Budgeting and Risk' is a convincing example of a finance & accounting case study.... Providers (savers) are the individuals or entities who provide capital to the system.... Users (borrowers) are the individuals or entities who use this capital or take loans.... There are two primary groups that contribute to the capital structure of the firm – shareholders and creditors....

The paper "The Testing for capital asset pricing model for the Chinese Stock Exchange" is a perfect example of a finance and accounting case study.... The main purpose of this research is to test the validity of using the capital asset pricing model in the Chinese Stock Market.... The paper "The Testing for capital asset pricing model for the Chinese Stock Exchange" is a perfect example of a finance and accounting case study.... The main purpose of this research is to test the validity of using the capital asset pricing model in the Chinese Stock Market....