CAPITAL ASSET PRICING MODEL
MANUAL OF FINANCIAL CONCEPTS
CAPITAL ASSET PRICING MODEL (CAPM)
It is a method for the calculation of the yield to be requested to the own sources of financing.
CAPM = FY + ß (MY – FY)
Whereas:
FY: Yield of non risk assets (normally treasury bonds).
MY: Yield of the stock market.
(MY-FY): Risk premium of the stock market.
ß(or beta): Coefficient of variation of the company’s own sources of financing in relation to the stock market own sources of financing.With a higher value of ß, the risk of the company will be higher.
If ß>1: The expected yield of own sources of financing of the company will be higher than the one of the market.
If ß<1: The expected yield of own sources of financing of the company will be lower than the one of the market.
If ß=0: The expected yield of own sources of financing of the company will be equal to the one of the market.
Example of CAPM calculation:
CONTACT US FOR ANY DOUBT OR TO ASK FOR A TAILOR MADE MODEL ADAPTED TO YOUR SPECIFIC NEEDS
PHONE
(34) 689 576 982
FINANCIAL SIMULATION
Sale of simulation financial models for project finance analysis and business valuation.
