# Definition for : Expected equity risk premium

Expected Equity risk premium is not directly observable. However, it can be calculated by estimating the Future cash flows of all companies, and then finding the Discount rate that equates those cash flows with current Share prices. It is this expected Equity risk premium that is used in the CAPM. See also Equity risk premium.

(See Chapter 19 The required rate of return of the Vernimmen)

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