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What is the difference between capital asset pricing model and constant growth difference between capital asset pricing model and constant growth approach?

Kyle Mckinney

in Student Loans

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Melissa Norris on March 27, 2018

The Constant growth model does not account for the risk; it uses the current market price, as a reflection of the expected risk return preference of investors in the market, while CAPM to consider the firm's risk as reflected by beta, in determining the refund or the cost of the ordinary share of the equity. Another difference is that when constant growth model is used to find the cost of the ordinary share of the equity, can be easily adjusted with a cost of floatation to find the cost of the new ordinary share capital. while the CAPM does not provide a simple adjustment. Although the CAPM Model has a strong theoretical basis, the facility for the calculation of the constant growth model justifies the use of the computer.


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