Equity Risk Premium for Investments Projects in Renewable Resources

Abstract

Risk premium is an important factor for different models that estimate the shareholders equity, the debt cost used to evaluate both the financial assets as well as investment projects. The paper presents a brief history of the risk premium, the main estimation methods together with the influence factors. Different risks are associated to the investments in the renewable resources and they are more difficult to evaluate than the investments in other projects.

Keywords

• risk
• equity risk premium
• required rate of return
• risk aversion