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Capital Assets Pricing Model  


Abstract Category: Accounts and Economics
Course / Degree: Economic Studies
Institution / University: Academy of Economic Studies-Bucharest, Romania
Published in: 2010


Dissertation Abstract / Summary:

This article introduces the WACC (Weighted Average Cost of Capital), CAPM (Capital Assets Pricing Model) and their components, emphasizing the advantages and disadvantages of using each model within the investment appraisal. Each model is taking in consideration the return and its associated risk. The return is generally a function of risk and is influencing the management decisions (such as investing in SMEs and small, growing companies). The high returns are expected to occur when investing in ‘risky’ share funds which imply a larger number of possible outcomes. In the second part of the article we will take in consideration the investment in a different business activity, which usually have different risk characteristics and hence any business carrying on those activities will have different beta factors. All the new funds put into the new project are subject to inherent risk of that project, and so these should be discounted at a rate which reflects that risk.


Dissertation Keywords/Search Tags:
Key words: return, risk, gearing level, cost of equity, cost of debt.

This Dissertation Abstract may be cited as follows:
Capital Assets Pricing Model, Macoveiciuc, Pastorel, Macoveiciuc Pastorel, Academy of Economic Studies-Bucharest


Submission Details: Dissertation Abstract submitted by Pastorel Macoveiciuc from Romania on 28-Jun-2010 00:52.
Abstract has been viewed 3154 times (since 7 Mar 2010).

Pastorel Macoveiciuc Contact Details: Email: mironovici-emilia@yahoo.com



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