Cost of capital

Analysis of the ever-changing price of money

Stock prices fell last fortnight. The S&P 500 index of big American companies dropped 2.9% to 5,048. At the current price, the S&P 500 offers a 9.3% annual expected return.

According to 𝑉𝑎𝑙𝑢𝑎𝑏𝑙's discounted cash flow model, the S&P 500 is worth about $4,666 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 8% overvalued.