How do I calculate the Expected Return of a stock?

Question

How can I calculate the Expected Return on a stock, such as Apple (AAPL)? Do I need to use historical data? What are the steps? Thank you!

Answer 1

Use the Capital Asset Pricing Model

     Kc   =   Rf   +   beta x ( Km - Rf )

where

    Kc is the risk-adjusted discount rate (also known as the Cost of Capital);

    Rf is the rate of a "risk-free" investment, i.e. cash;

    Km is the return rate of a market benchmark, like the S&P 500.

Use the yield on the 10-year treasury note for the risk free rate

The historical return on the market is between 11-12 percent.

Beta you can find in yahoo Key Statistics