Capital Assist Pricing Model Calculator
Capital Assist Pricing Model Calculator
The CAPM model (Capital Asset Pricing Model) is one of the foundational models in finance designed to specify the appropriate required rate of return of a financial asset or investment. Capital Assist Pricing Model Calculator is mostly applied to financial assets (securities). Since the core of the CAPM model is the "beta" parameter, which is the most widely employed financial measure used by academic researchers and practitioners, we shall get a bit more insight into its function.
The Capital Asset Pricing Model uses a variation of discounted cash flows; only instead of giving yourself a "margin of safety" by being conservative in your earnings estimates, you use a varying discount rate that gets bigger to compensate for your investment's riskiness. There are diverse ways to measure risk; the original CAPM defined risk in terms of volatility, as measured by the investment's beta coefficient. The formula is:
Kc = Rf + beta x (Km - Rf)
where
Kc is the risk-adjusted discount rate (also known as the Cost of Capital); Rf is the rate of a "risk-free" investment, i.e., cash; Km is the return rate of a market benchmark, like the S&P 500.
The capital asset pricing model calculator is an online platform where the process is online and within seconds you can get your solution on the screen.
