how CAPM can determine the cost of equity?

Do CAPM can determine the real cost of equity?

1 Answer(s)


A principal advantage of CAPM is the objective nature of the estimated costs of equity that the model can yield. CAPM cannot be used in isolation because it necessarily simplifies the world of financial markets. But financial managers can use it to supplement other techniques and their own judgment in their attempts to develop realistic and useful cost of equity calculations.

So, CAPM does determine the cost of equity.