If you look at either the build-up or CAPM cost of capital models for discount rate calculation, the elements can be broken down into two major groups: systematic and unsystematic risk. You cannot diversify away from the systematic risk as it affects the entire market. Unsystematic risk, on the other hand, is something the investors… Continue Reading
The debate about how to assess company risk and calculate the discount and cap rates rages on. While the CAPM and Build Up cost of capital models remain widely accepted, the devil, as usual, is in the details. None as obvious as when using the risk premia for building up the equity discount rates for… Continue Reading
