Potential interest rate on the shareholders equity:
K_E = R_f + \beta \, R_p |
where
R_f | risk-free bond (like for example U.S. Treasury Bond) |
R_p | risk premium R_p = R_m - R_f, where R_m is historical average return of the stock market |
\beta | sensitivity to the market risk for the security |
See also
Business / Business Administration / Financial Management / Financial Accounting /