CAPM, Risk-Free Rates, and Market Premia

CAPM, Risk-Free Rates, and Market Premia covers CAPM, risk-free-rate, and market-risk-premium terms used in required-return estimation.

Use these pages when timing, risk, reinvestment, discount rates, or forecast cash flows change the value conclusion. It sits inside Discount Rates, Required Return, and Risk Premia, so readers can move up when the broader valuation context matters.

Use the table below to choose the narrower valuation branch before relying on a model input, market multiple, forecast, risk premium, price signal, or recommendation.

What This Branch Covers

What to Check

• Forecast period, free cash flow definition, terminal value method, discount rate, reinvestment assumption, and valuation date.
• Nominal versus real inputs, pre-tax versus after-tax cash flows, currency, inflation, and timing convention.
• NPV, IRR, MIRR, payback, annuity, perpetuity, present value, and compounding formula inputs.
• Scenario, sensitivity, hurdle rate, risk premium, risk-free rate, beta, and cost-of-capital support.
• Effect on capital budgeting, deal economics, impairment analysis, project approval, or intrinsic value.

Common Mistakes

• Mixing nominal discount rates with real cash flows.
• Using accounting earnings when the model requires cash flow.
• Treating IRR as superior without checking scale, timing, and reinvestment assumptions.
• Ignoring terminal value sensitivity and forecast uncertainty.

Discounting and cash-flow content is educational and does not provide investment, tax, accounting, project-approval, appraisal, or valuation advice.

In this section

Choose a subsection first. Deeper term pages live inside each subsection, which keeps large topic hubs readable.