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 surged 1.8% to 5,543. The index offers an 8.4% annual expected return at the current price.

According to 𝑉𝑎𝑙𝑢𝑎𝑏𝑙's discounted cash flow model, the S&P 500 is worth about $5,185 per unit. This model, which relies on analysts' consensus estimates for each company in the in…