* Simultaneity: The discount rate depends on the standard deviation (risk) of the project. But value of the project depends on the discount rate again.
* Solution: Certainty equivalent version ([[Certainty Equivalent Cash Flow]]) of CAPM
* CAPM may not be the right model to value expected returns (ongoing academic debate)
* CAPM is not inconsistent with real options valuations as the CAPM can be used to value the underlying
* Required rate of return for a new venture:

$\LARGE r_{proj}$ = $\LARGE R_F + \beta_{proj}(r_M - r_F) + \text{Effort} + \text{Illiquidity}$
bag
finance_public
created
Sat, 07 Jul 2012 16:32:00 GMT
creator
dirkjan
modified
Sat, 07 Jul 2012 16:32:00 GMT
modifier
dirkjan
tags
M13
Model
Term
creator
dirkjan