Estimating risk‐adjusted interest rates for dairy farms

The Capital Asset Pricing Model (CAPM) is used to estimate the cost of equity for each of 62 New York dairy farms that participated in a business analysis program from 1988 through 1997. The estimated betas were statistically less than one for all farms. Risk‐adjusted interest rates ranged from a high of 9.46 per cent to a low of 0.72 per cent, reflecting these low estimated betas.