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Equity Analysis

What is the Capital Asset Pricing Model (CAPM)?

CAPM is a measure used by investors to evaluate the expected return on investments. It allows investors to diversify their investments to achieve the desired return based on the risk of each investment.

What Is Time Value of Money?

Time value of money describes how the sum of money that you hold currently is worth more than the equivalent sum in the future.

What Is Equity Risk Premium?

Equity-risk premium is the difference between expected returns from the stock market and the expected returns from risk-free investments.

What Is Risk-Free Rate?

The risk-free rate is the ‘theoretical’ minimum rate of return on investments with no risk.

What Is Free Cash Flow to the Firm?

Free cash flow to the firm (FCFF) is the cash flow that a company is ‘free’ to distribute to all providers of money (both, debt and equity) without damaging its growth opportunities. Below I explain the process an analyst would go through to estimate free cash flow. Like all forecasts, your FCFF starts with your…