Subject category:
Finance, Accounting and Control
Published by:
IBS Case Development Center
Length: 8 pages
Data source: Generalised experience
Topics:
Cost of equity; Capital asset pricing model (CAPM); Market rate of return; Risk-free rate of return; Mid-cap index; Financial management; Finance for managers; Principles of financial management; Managerial finance; Business finance; Course case maps; Course case packs; MBA; Corporate finance; Financial management course case
Abstract
This case was written to understand the cost of equity using the capital asset pricing model (CAPM). CAPM is widely used to calculate the cost of equity while calculating the cost of capital of a firm. CAPM is also widely used to calculate the cost of equity for discounting the cash flow of projects and other investments made by companies. The case takes two Sensex heavyweights - one which is aggressive (Jaiprakash Associates) and the other which is passive (Sun pharmaceuticals) - to calculate the cost of equity using CAPM. The case also provides scope for discussion on using different methods of calculating the cost of equity.
Location:
Other setting(s):
2009
About
Abstract
This case was written to understand the cost of equity using the capital asset pricing model (CAPM). CAPM is widely used to calculate the cost of equity while calculating the cost of capital of a firm. CAPM is also widely used to calculate the cost of equity for discounting the cash flow of projects and other investments made by companies. The case takes two Sensex heavyweights - one which is aggressive (Jaiprakash Associates) and the other which is passive (Sun pharmaceuticals) - to calculate the cost of equity using CAPM. The case also provides scope for discussion on using different methods of calculating the cost of equity.
Settings
Location:
Other setting(s):
2009