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That's the ex-post return on equity, not the cost of equity. You could argue that the former is an approximation of the latter, but they are not necessarily the

That's the ex-post return on equity, not the cost of equity. You could argue that the former is an approximation of the latter, but they are not necessarily the same. Anyways, it's not really relevant for a small Amazon Seller who may get a _loan_ at which rate a huge S&P 500 business can get _capital_ (if a S&P 500 business wants a loan, I doubt it would typically even pay 5% these days).

JumpCrisscross 14y ago
That's CAPM cost of equity assuming a market of rich and emerging market stocks and bonds and a risk-free rate of gilts or Treasuries, whichever cheaper; the average ex-post return of the S&P 500 for the period (1926-2012) is closer to 10.5%. Regarding VC one plugs in expectations; VC is modern portfolio mechanics at its most vivid. This is relevant because 13%, as a cost of capital, is not intrinsically high when even Bank of America today would pay that if it raised equity (it has) and could assume a long-run return on its stock of at least 7.3% (below its targeted ROE). A quick bond search shows that several S&P 500 members, BofA included, paying over 13% on at least some of their bonds (no doubt the riskier ones). Therefore 13% isn't usurious and probably a fair cost of capital for a small business.