Table 2.
Estimates of financial and macroeconomic parameters.
| Parameter | Value | Estimating source | |
|---|---|---|---|
| Nominal risk-free rate | rfn | 4.87% | Long-term Treasury bond (maturity of 30 years, average rate from the year 2005 to 2010) |
| Real risk-free rate | rfr | 2.37% | Inflation-indexed Treasury bond (maturity of 30 years, average rate from the year 2005 to 2010) |
| Inflation rate | i = (1 + rfn)/(1 + rfr) − 1 | 2.44% | |
| Beta | β | 1.1 | Betas by sector calculated by Damodaran (see http://pages.stern.nyu.edu/∼adamodar/) |
| Risk premium rate | rp | 4.00% | Periodic reports, released by survey institutes, about listed companies on the Milan stock exchange |
| Expected return on equity | ke = rfr + (β·rp) | 6.77% | |