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Lol, what is the better alternative?
That’s just capm with additional factors. I haven’t seen one project that doesn’t use a modified capm approach. Or more specifically, none of the projects that I’ve worked on uses erp as the only risk factor.
No CAP(m)
“It only holds under very certain assumptions which are basically never met irl”
Please stop dissing the entirety of valuation like this.
Oh you were just talking about capm..
I think it has to deal with the fact that it simultaneously (1) has the appearance of being rigorous/„scientific“ and not being a complete arbitrary way to come up with discount rate and (2) at the same time is simple enough to be followed and understood by a broad circus of people who need to (at least roughly) understand valuation, but most of whom do not have enough background/willingness/possibilities to study and understand more complex models (auditors, management, business owners, judges, regulators etc etc).
And once it had established itself as a convention/habit it is really hard to kick it out - unless the new model is also simple enough and is really proven to be superior (and even if this is the case it would take a lot of time).
& what is this new model you’re referring to?
Sorry meant “a new model”. Was referring to a theoretical (and not particularly likely) scenario when a new simple an obviously superior model suddenly emerges