Determination of cost of equity in infrastructure projects investment analysis: relevant approaches

The article is devoted to various approaches to determination of the cost of equity in investment analysis of infrastructure projects. Today, one of the problems in assessing the investment attractiveness and effectiveness ofprojects is the fair reflection ofparticipants’ risks in determining their required returns. Traditionally, the cost of equity is calculated using the capital asset pricing model - CAPM. The analysis of the available sources and practical aspects of applying traditional methodologies showed that the estimates of the cost of equity based on the data from global analysts and traditional methods may significantly overstate the cost of equity for Russian investors, leading to a decrease in investment projects ’ attractiveness. The article presents analytics on the spread of returns to shareholders and creditors, traditional and alternative approaches to calculating the cost of equity and the practice of the division of risks and returns between the participants of infrastructure projects. Keywords. Cost of equity, investment