Harvard Business Review

MARCH 10, 2011

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."

CAPM 13

CAPM Cost Discounted Cash Flow Cost of Capital 13

Harvard Business Review

JANUARY 15, 2014

Is market performance predictable for a specific product or class of products? In this case, accountability is not for correct ex-ante prediction, but for fast learning and contingent execution. respectively, suggesting that market risk is the major driver of our inability to predict.

Black-Scholes 8

Black-Scholes Productivity Products CAPM 8

Harvard Business Review

MARCH 10, 2011

Download this pdf for an executive summary, or login here for the full report.) 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.

Cost of Capital 13

Cost of Capital CAPM Cost Discounted Cash Flow 13