Remove Bond Remove CAPM Remove Market Risk Remove Marketing

Why Sit on All that Cash? Firms Uncertain on Cost of Capital

Harvard Business Review

In estimating the cost of equity, nearly nine out of ten organizations use the capital asset pricing model (CAPM), which calculates the cost of equity using a risk-free rate, beta factor, and a market risk premium, each of which introduces significant variability. Book vs. Market Weighting Factors Used for Debt and Equity in Calculation of WACC. . Current market debt/equity ratio. Current book debt/current market equity ratio.