Describe each of the following methods for estimating the cost of equity (a) The CAPM (b) DCF (c) The bond yield plus risk premium Where can you obtain inputs for each of these methods, and how accurate are estimates based on each procedure Can you state categorically that one method is better than...

a Using data as given in the model here is the basic CAPM equation for r s the cost of common equity r s r RF b i r M r RF 6 1211 6 12 The spreadsheet model provides some more information on the CAPM ...

Describe each of the following methods for estimating the cost of equity: (a) The CAPM (b) DCF

Question:

Describe each of the following methods for estimating the cost of equity:

(a) The CAPM

(b) DCF

Where can you obtain inputs for each of these methods, and how accurate are estimates based on each procedure? Can you state categorically that one method is better than the others, or does the “Best” method depend on the circumstances?