The capital asset pricing model is used to value the cost of equity and the cost of debt by valuing a company using discounted cash flow. The capital asset pricing model can be used in any international market irrespective of where the company is based.
Nov 01 2013 11:24 AM
Essentially the capital asset pricing model helps you to calculate the cost of equity which means what returns are the equity investors expecting when they invest their money in the company. And number 2 – the cost of debt, which means what is the interest rate a company has to pay while borrowing money.
Now the cost of equity and cost of debt might vary based on various countries. For example, in Latin America the cost of equity and the cost of debt might be higher due to the perceived risk, however the capital asset pricing model can be used in any country including Latin America.