Discard CAPM – There Is A Better Way To Think About Cost Of Equity

By Erik Kobayashi-Solomon, Managing Director – Framework Investing The first rule of modern finance – that a dollar today is worth more than a dollar tomorrow – is an elegant first principle that underlies project financing as well as bond and equity investing. This industry is projected to double in size from $22 billion to an estimated $44 billion [activistinvesting] However, in equity investing, the tactical implementation of this elegant principle – the rate used in discounted cash flow analyses – is contentious because of the subjectivity of choosing an appropriate rate. This subjectivity is born from the fact that,…