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Still Many Ways to Skin a Capital Cost

Harvard Business Review

When executives evaluate a potential investment, whether it's to build a new plant, enter a new market, or acquire a company, they weigh its cost against the future cash flows they expect will spring from it. Not at all, he said, because it's "no secret that applying the CAPM is as much an art as financial science." McNulty et al.

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Stop Trying to Predict Which New Products Will Succeed

Harvard Business Review

Is market performance predictable for a specific product or class of products? respectively, suggesting that market risk is the major driver of our inability to predict. Look at the variance of your new-market products. Though there are multiple types of prediction, the gold standard is the prediction of precise outcomes.

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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. Current market debt/equity ratio. Privately held.