Potential interest Shareholders' expectation on the annual return rate on its equity in the shareholders equityBusiness:
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K_E = R_f + \beta \, R_p\frac{\rm Return}{\rm E} |
where
| annual cash return , whether as dividends or as capital growth | R_f | risk-free bond (like for example U.S. Treasury Bond)||||||||||||||||||||
| R_p |
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| sensitivity to the market risk for the security
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The most popular model of estimating the Cost of Equity is Capital Asset Pricing Model (CAPM):
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See also
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Business / Business Administration / Financial Management / Financial Accounting
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