Below are Cost of Capital terms defined. To Learn more about Cost of Capital Navigator and usable data. Click here.
Beta is the term commonly used for sensitivity to market risk. In the context of the Capital Asset Pricing Model (CAPM), beta measures the expected sensitivity of changes in returns of a security to changes in returns of the market.
The uncertainty of expected returns arising from factors other than those factors correlated with the investment market as a whole.
The expected return appropriate for the expected level of risk. Also, commonly called the discount rate, the expected return or the required return.
The expected return to debt investors.
The expected return to common equity investors.
The expected return to preferred equity investors.
The extra return that investors demand to compensate them for investing in equities rather than investing in risk-free securities. Also, commonly called the market risk premium.
A way of determining a value indication of an investment using one or more methods that convert the expected future economic benefits associated with an investment into a single "present value" amount.
The return available on a security that the market generally regards as free of the risk of default.
The difference between the actual historical excess return and the excess return predicted by beta that is attributed to the risk implied by the size of the subject company.
It represents the market-capitalization-weighted cost of capital for both equity holders and debt holders.