Under these assumptions, Fama and French (1992) find that the relation between average return and beta is flat. We argue that these two auxiliary assumptions are not reasonable. We demonstrate that ...

A higher risk-free rate would increase the cost of capital while a lower rate would reduce it—either would significantly impact the outcome of a CAPM calculation. Beta can also be troublesome as ...

Learn more about the weighted average cost of capital and see why firms unlever and re-lever beta to compare debt and equity ...

The adjusted premium added to the risk-free rate is the difference in the expected market return times the beta of the asset. CAPM provides an expected return on the asset in focus. This expected ...