The Capital at Risk Model Applied to the Firms Alpha, Beta and Gamma

Federico Beltrame, Roberto Cappelletto and Gabriele Toniolo
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Federico Beltrame: University of Udine
Roberto Cappelletto: University of Udine

Chapter 5 in Estimating SMEs Cost of Equity Using a Value at Risk Approach, 2014, pp 105-166 from Palgrave Macmillan

Abstract: Abstract In Chapter 4, we illustrated how to adapt the theory of the proposed model to the practical needs of company valuation. In this chapter, we will move our attention to a comparison between the CaRM approach and the CAPM approach through three case studies of Italian firms belonging to different sectors and with individual economic and financial situations: Alpha, Beta and Gamma. 2 In some cases the information are changed to protect firms privacy or something similar. The application can be extended to any type of non-financial firm in any geographical area. To appreciate these aspects and judge these firms, we will make reference to the ADI system used by the consultancy firm Capp & Value S.r.l which has over thirty years of experience in Italy related to matters such as financial analysis and creditworthiness of small and medium enterprises. More specifically, the score awarded is obtained by analysing the historical accounting data. The model is based on the valuation of business equilibrium, both financial and economic, in static and dynamic terms. Indeed, business risk analysis grants great importance to the trends of various indicators. Every equilibrium and trend is given a technical score using a scale from one to five (Table 5.1).

Keywords: Cash Flow; Capital Asset Price Model; Free Cash Flow; Risk Capital; Financial Debt (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-38930-5_6

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DOI: 10.1057/9781137389305_6

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