Question
Select a publicly traded security of your choice and estimate the cost of equity. Now, suppose that a client wants to know how you estimated
Select a publicly traded security of your choice and estimate the cost of equity. Now, suppose that a client wants to know how you estimated the cost of equity using the CAPM. Explain in detail your estimation of each of the components of the CAPM (risk-free rate, beta, and market risk premium). You need to mention the source of the information if you use publicly available data. Ensure that you mention the date when you are retrieving the information because market-based information will change daily. I strongly suggest you estimate the beta using market information. If you get the beta from a source (i.e., Yahoo Finance), you might need to justify why you think that source's beta is correct.Finally, what assumptions are you making, and what potential mistakes can you identify might happen? For example, do you think that the beta, risk-free rate, market risk premium are too low, too high?
Write as if your explanation were part of an investment research report in an investment bank.
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