easy · Investment Banking valuation-core
How is the 'Cost of Equity' typically calculated in investment banking?
- Using the Capital Asset Pricing Model (CAPM): Risk-Free Rate + Beta * Market Risk Premium
- As the weighted average of all interest rates charged across the company's outstanding debt tranches
- By dividing the company's current annual dividend payment by its latest closing market share price
- By subtracting the effective tax rate from the company's reported EBITDA margin
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