Estimating Capital Cost of Project Based on Behavioral Capital Pricing Model

The capital asset pricing model (CAPM) can not be applied to estimate the capital cost of the project because of lack of applying condition due to the inefficiency of the market. In this paper we analyze the behavioral capital asset pricing model(BAPM) which has been only used in the financial markets and we get the conclusion that it can be used to estimate the project capital cost. We also modify the momentum combination from two aspects: (1) replacing the trading-volume with the exchange rate (2) constructing stock portfolio which is more stable in short time, and improving the accuracy of estimation of "behavior beta " with simplified calculation. In the end, we address the approach of estimating the project capital cost based on the relationship between equity beta(beta_e)and asset beta(beta_a) which is well clarified in the inefficient market.