The expected rate of return for creditors, like banks, is usually clearly communicated, such as through an interest rate. But what about for shareholders? How is this calculated?
The Capital Asset Pricing Model (CAPM) is widely used to estimate the percentage of a company’s stocks expected to be returned to shareholders – in other words, the shareholders expected rate of return (rE).
This course, along with the “Time value of money,” “Discount rate,” and “WACC” will help you to calculate the cost of capital when raising funds in your company.
