Anything that we own; vehicle, furniture, land, building, machinery, shares, debentures, mutual funds, all fall under the category of capital investment. It is basically any property held by an assessee. It does not really matter whether that asset is in connection with his/her business.
The linear relation between an investment along with its risk and the required return from is called the Capital Asset Pricing Model. This is a widely used finance theory and is based on the relation between equity risk premium and the risk-free rate.
Assumptions form the core of this theory which is why it is often considered as baseless. The capital assets or equipment are also available as secondary and the best possible place to procure these is Capital Asset Exchange and Trading. It was founded in 1982 where the buying and selling of equipment is the safest and easiest. This has become the world’s market place for secondary capital equipment.
There are several setbacks of a CAPM or Capital Asset Pricing Model. The first one is its use of risk free rate. This is the yield on short term government securities but because it keeps on changing it is volatile and not fool-proof. The pricing model’s use of return on the market is another loophole of this theory.
Despite the few problems with the CAPM theory, it cannot be denied that there are several advantages of this calculation process as well. The best thing about this is its simplistic approach. Being so simple it can be stress-tested at any time in order to understand the possible outcomes. The unsystematic specific risk is eliminated due to the assumption of diversified portfolio of the investors.
Unlike other return models the CAPM takes the systematic risk of the account into consideration, this is very helpful because the unforeseen risks cannot be calculated. The business and financial risk variability is another crucial and helpful point of the CAPM theory. Often, when an investigation of opportunities is done in business and the business mix and financing are varied from the current businesses, then the various return forms cannot be made. But in this scenario too, the CAPM can be used.
The Capital Asset Exchange and Trading too is a very convenient place for secondary capital equipment sales and purchase. It does not entail any risk; it is a completely transparent and effective marketplace. Their data base and tracking system have built a new level of global intelligence. The CAE is the world’s most active capital equipment marketplace to the present day, and they are always looking forward to more and more educated, talented and passionate individuals joining their team.
The Pricing Model of Capital Assets just like any other model is not completely devoid of disadvantages, but at the same time it does have characteristics that are pretty useful and applicable for all. Though the CAPM is largely criticized for its basis on assumption, yet in many areas it is better than other pricing models present. Its easily calculative and stress tested features along with some aspects of investment mosaic can bring some of the most desirable results.