Still Many Ways to Skin a Capital Cost
Harvard Business Review
MARCH 10, 2011
To make sure they're comparing apples to apples, they discount those future cash flows to arrive at their net present value. Estimating the rate at which to discount the cash flows — the cost of equity capital — is an integral part of the exercise, and the choice of rate has a significant effect on estimates of a project's or a company's value. Not at all, he said, because it's "no secret that applying the CAPM is as much an art as financial science."