Given the extensive problems with the CAPM assumptions, why is it considered the best method for computing cost of equity? Do you agree with this? What alternatives exist?

What can/should a financial manager do to account for the fact that the value of Beta will change given how market returns are calculated (i.e., using the Dow Jones, NASDAQ, or S&P 500)?

• Are there instances where this isn't a concern, such as all estimates of Beta being greater than 1.0?

Answer rating: 100% (QA)

The Capital Asset Pricing Model CAPM is widely used in finance to estimate the cost of equity despite its limitations and assumptions There are several reasons why it is considered the best method 1 S... View the full answer