CAPM & Expected NPV

Calculates a CAPM required return from the risk-free rate, beta, and market risk premium, plus a probability-weighted expected NPV across bull, base, and bear scenarios. Inputs are the three CAPM parameters and a probability and NPV for each scenario.

By Devon Coombs, CPA, MBA · Teaching Professor of Finance, Santa Clara University · Reviewed August 2026

From the author: Devon Coombs, CPA, MBA teaches finance at Santa Clara University and works with corporate teams on practical AI.

AI training for finance teams · Consulting · The 10 Laws of Finance

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CAPM & Expected NPV

CAPM required return

Risk-free rate

Beta

Market risk premium

Required return

12.00%

3.00% + 1.50 × 6.00%

Expected NPV (probability-weighted)

Bull case

Probability

Scenario NPV

Base case

Probability

Scenario NPV

Bear case

Probability

Scenario NPV

Expected NPV = Σ (Probability × Scenario NPV)

$1,000,000

A positive expected NPV is necessary but not sufficient: a wide bull-to-bear spread means real risk, which an incremental reward must compensate (Law 7).

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This calculator comes from the free Real Estate Finance course, where the concept is taught with readings, worked examples, and practice questions.

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Built by Devon Coombs, CPA, MBA, Teaching Professor of Finance at Santa Clara University.