Cost of capital

Analysis of the ever-changing price of money

Stock prices rose last fortnight. The S&P 500 index of big American companies climbed 2.3% to 5,307. The S&P 500 offers an 8.8% annual expected return at the current price.

According to 𝑉𝑎𝑙𝑢𝑎𝑏𝑙's discounted cash flow model, the S&P 500 is worth about $4,632 per share. This model, which relies on analysts' consensus estimates for each company in the index and a stable payout ratio based on the index's average return on equity, suggests that the market is currently 14% overvalued.