Andrea Moro launches new capital cost model at the Academy of Entrepreneurial Finance Conference
Andrea Moro has developed a new approach to the modelling of the cost of capital of firms. It is designed specifically to accommodate the behaviour of SMEs.
Andrea’s approach is based on treating the entrepreneur as a special kind of lender who expects a return for the risk they incur from the possible bankruptcy of the firm and the impact this would have on their personal wealth. This contrasts with the traditional approach (CAPM) which, rooted in a concern for large corporations, is based on the perspective of an investor focused on a return on investment. The derived mathematical model can be easily implemented by SMEs as a useful tool to evaluate projects.
The new approach was presented on September 24 in a paper entitled "Beyond Social Prestige: Working out the Minimum Expected Return for Entrepreneurs" at the Academy of Entrepreneurial Finance Conference - Los Angeles.
