The cost of equity capital for a firm can be estimated using an asset pricing model.

Question

Quizplus · Accepted Answer

The estimation of the cost of equity capital is a very complex issue.In chapter 8,the entire chapter was devoted to exploring the capital asset pricing model,which is just one way of obtaining the cost of equity capital.Similarly,chapter 9 discussed a number of multi-factor pricing models,which are an alternative to the CAPM for estimating the cost of capital.These approaches can be classified as formal modelling of the cost of capital.

The Cost of Equity Capital for a Firm Can Be