Salesforce Inc. (NYSE:CRM)

Capital Asset Pricing Model (CAPM)

Capital asset pricing model (CAPM) indicates what should be the expected or required rate of return on risky assets like Salesforce Inc. common stock.

Rates of Return
Variance and Covariance
Systematic Risk (β) Estimation
Expected Rate of Return

Rates of Return

Salesforce Inc., monthly rates of return

		Salesforce Inc. (CRM)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_CRM,t¹	Dividend_CRM,t¹	R_CRM,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Feb 28, 2018	$116.25			2,713.83
1.	Mar 31, 2018	$116.30		0.04%	2,640.87	-2.69%
2.	Apr 30, 2018	$120.99		4.03%	2,648.05	0.27%
3.	May 31, 2018	$129.33		6.89%	2,705.27	2.16%
.	.	.	.	.	.	.
.	.	.	.	.	.	.
.	.	.	.	.	.	.
70.	Dec 31, 2023	$263.14		4.46%	4,769.83	4.42%
71.	Jan 31, 2024	$281.09		6.82%	4,845.65	1.59%
Average (R):				1.74%		0.95%
Standard deviation:				10.20%		5.18%

		Salesforce Inc. (CRM)			Standard & Poor’s 500 (S&P 500)
t	Date	Price_CRM,t¹	Dividend_CRM,t¹	R_CRM,t²	Price_{S&P 500,t}	R_{S&P 500,t}³
	Feb 28, 2018	$116.25			2,713.83
1.	Mar 31, 2018	$116.30		0.04%	2,640.87	-2.69%
2.	Apr 30, 2018	$120.99		4.03%	2,648.05	0.27%
3.	May 31, 2018	$129.33		6.89%	2,705.27	2.16%
4.	Jun 30, 2018	$136.40		5.47%	2,718.37	0.48%
5.	Jul 31, 2018	$137.15		0.55%	2,816.29	3.60%
6.	Aug 31, 2018	$152.68		11.32%	2,901.52	3.03%
7.	Sep 30, 2018	$159.03		4.16%	2,913.98	0.43%
8.	Oct 31, 2018	$137.24		-13.70%	2,711.74	-6.94%
9.	Nov 30, 2018	$142.76		4.02%	2,760.17	1.79%
10.	Dec 31, 2018	$136.97		-4.06%	2,506.85	-9.18%
11.	Jan 31, 2019	$151.97		10.95%	2,704.10	7.87%
12.	Feb 28, 2019	$163.65		7.69%	2,784.49	2.97%
13.	Mar 31, 2019	$158.37		-3.23%	2,834.40	1.79%
14.	Apr 30, 2019	$165.35		4.41%	2,945.83	3.93%
15.	May 31, 2019	$151.41		-8.43%	2,752.06	-6.58%
16.	Jun 30, 2019	$151.73		0.21%	2,941.76	6.89%
17.	Jul 31, 2019	$154.50		1.83%	2,980.38	1.31%
18.	Aug 31, 2019	$156.07		1.02%	2,926.46	-1.81%
19.	Sep 30, 2019	$148.44		-4.89%	2,976.74	1.72%
20.	Oct 31, 2019	$156.49		5.42%	3,037.56	2.04%
21.	Nov 30, 2019	$162.89		4.09%	3,140.98	3.40%
22.	Dec 31, 2019	$162.64		-0.15%	3,230.78	2.86%
23.	Jan 31, 2020	$182.31		12.09%	3,225.52	-0.16%
24.	Feb 29, 2020	$170.40		-6.53%	2,954.22	-8.41%
25.	Mar 31, 2020	$143.98		-15.50%	2,584.59	-12.51%
26.	Apr 30, 2020	$161.95		12.48%	2,912.43	12.68%
27.	May 31, 2020	$174.79		7.93%	3,044.31	4.53%
28.	Jun 30, 2020	$187.33		7.17%	3,100.29	1.84%
29.	Jul 31, 2020	$194.85		4.01%	3,271.12	5.51%
30.	Aug 31, 2020	$272.65		39.93%	3,500.31	7.01%
31.	Sep 30, 2020	$251.32		-7.82%	3,363.00	-3.92%
32.	Oct 31, 2020	$232.27		-7.58%	3,269.96	-2.77%
33.	Nov 30, 2020	$245.80		5.83%	3,621.63	10.75%
34.	Dec 31, 2020	$222.53		-9.47%	3,756.07	3.71%
35.	Jan 31, 2021	$225.56		1.36%	3,714.24	-1.11%
36.	Feb 28, 2021	$216.50		-4.02%	3,811.15	2.61%
37.	Mar 31, 2021	$211.87		-2.14%	3,972.89	4.24%
38.	Apr 30, 2021	$230.32		8.71%	4,181.17	5.24%
39.	May 31, 2021	$238.10		3.38%	4,204.11	0.55%
40.	Jun 30, 2021	$244.27		2.59%	4,297.50	2.22%
41.	Jul 31, 2021	$241.93		-0.96%	4,395.26	2.27%
42.	Aug 31, 2021	$265.27		9.65%	4,522.68	2.90%
43.	Sep 30, 2021	$271.22		2.24%	4,307.54	-4.76%
44.	Oct 31, 2021	$299.69		10.50%	4,605.38	6.91%
45.	Nov 30, 2021	$284.96		-4.92%	4,567.00	-0.83%
46.	Dec 31, 2021	$254.13		-10.82%	4,766.18	4.36%
47.	Jan 31, 2022	$232.63		-8.46%	4,515.55	-5.26%
48.	Feb 28, 2022	$210.53		-9.50%	4,373.94	-3.14%
49.	Mar 31, 2022	$212.32		0.85%	4,530.41	3.58%
50.	Apr 30, 2022	$175.94		-17.13%	4,131.93	-8.80%
51.	May 31, 2022	$160.24		-8.92%	4,132.15	0.01%
52.	Jun 30, 2022	$165.04		3.00%	3,785.38	-8.39%
53.	Jul 31, 2022	$184.02		11.50%	4,130.29	9.11%
54.	Aug 31, 2022	$156.12		-15.16%	3,955.00	-4.24%
55.	Sep 30, 2022	$143.84		-7.87%	3,585.62	-9.34%
56.	Oct 31, 2022	$162.59		13.04%	3,871.98	7.99%
57.	Nov 30, 2022	$160.25		-1.44%	4,080.11	5.38%
58.	Dec 31, 2022	$132.59		-17.26%	3,839.50	-5.90%
59.	Jan 31, 2023	$167.97		26.68%	4,076.60	6.18%
60.	Feb 28, 2023	$163.61		-2.60%	3,970.15	-2.61%
61.	Mar 31, 2023	$199.78		22.11%	4,109.31	3.51%
62.	Apr 30, 2023	$198.37		-0.71%	4,169.48	1.46%
63.	May 31, 2023	$223.38		12.61%	4,179.83	0.25%
64.	Jun 30, 2023	$211.26		-5.43%	4,376.86	4.71%
65.	Jul 31, 2023	$225.01		6.51%	4,588.96	4.85%
66.	Aug 31, 2023	$221.46		-1.58%	4,507.66	-1.77%
67.	Sep 30, 2023	$202.78		-8.43%	4,288.05	-4.87%
68.	Oct 31, 2023	$200.83		-0.96%	4,193.80	-2.20%
69.	Nov 30, 2023	$251.90		25.43%	4,567.80	8.92%
70.	Dec 31, 2023	$263.14		4.46%	4,769.83	4.42%
71.	Jan 31, 2024	$281.09		6.82%	4,845.65	1.59%
Average (R):				1.74%		0.95%
Standard deviation:				10.20%		5.18%

Show all

¹ Data in US$ per share of common stock, adjusted for splits and stock dividends.

² Rate of return on common stock of CRM during period t

³ Rate of return on S&P 500 (the market portfolio proxy) during period t

Variance and Covariance

Salesforce Inc., calculation of variance and covariance of returns

t	Date	R_CRM,t	R_{S&P 500,t}	(R_CRM,t–R_CRM)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_CRM,t–R_CRM)×(R_{S&P 500,t}–R_{S&P 500})
1.	Mar 31, 2018	0.04%	-2.69%	2.87	13.26	6.17
2.	Apr 30, 2018	4.03%	0.27%	5.27	0.46	-1.56
3.	May 31, 2018	6.89%	2.16%	26.59	1.46	6.23
.	.	.	.	.	.	.
.	.	.	.	.	.	.
.	.	.	.	.	.	.
70.	Dec 31, 2023	4.46%	4.42%	7.43	12.04	9.46
71.	Jan 31, 2024	6.82%	1.59%	25.85	0.41	3.24
Total (Σ):				7,284.09	1,876.53	2,389.03

t	Date	R_CRM,t	R_{S&P 500,t}	(R_CRM,t–R_CRM)²	(R_{S&P 500,t}–R_{S&P 500})²	(R_CRM,t–R_CRM)×(R_{S&P 500,t}–R_{S&P 500})
1.	Mar 31, 2018	0.04%	-2.69%	2.87	13.26	6.17
2.	Apr 30, 2018	4.03%	0.27%	5.27	0.46	-1.56
3.	May 31, 2018	6.89%	2.16%	26.59	1.46	6.23
4.	Jun 30, 2018	5.47%	0.48%	13.91	0.22	-1.75
5.	Jul 31, 2018	0.55%	3.60%	1.41	7.02	-3.14
6.	Aug 31, 2018	11.32%	3.03%	91.90	4.30	19.88
7.	Sep 30, 2018	4.16%	0.43%	5.87	0.27	-1.27
8.	Oct 31, 2018	-13.70%	-6.94%	238.35	62.30	121.86
9.	Nov 30, 2018	4.02%	1.79%	5.22	0.69	1.90
10.	Dec 31, 2018	-4.06%	-9.18%	33.55	102.63	58.68
11.	Jan 31, 2019	10.95%	7.87%	84.91	47.82	63.72
12.	Feb 28, 2019	7.69%	2.97%	35.39	4.08	12.02
13.	Mar 31, 2019	-3.23%	1.79%	24.63	0.70	-4.17
14.	Apr 30, 2019	4.41%	3.93%	7.13	8.87	7.95
15.	May 31, 2019	-8.43%	-6.58%	103.38	56.71	76.57
16.	Jun 30, 2019	0.21%	6.89%	2.33	35.28	-9.06
17.	Jul 31, 2019	1.83%	1.31%	0.01	0.13	0.03
18.	Aug 31, 2019	1.02%	-1.81%	0.52	7.63	1.99
19.	Sep 30, 2019	-4.89%	1.72%	43.90	0.59	-5.07
20.	Oct 31, 2019	5.42%	2.04%	13.59	1.19	4.02
21.	Nov 30, 2019	4.09%	3.40%	5.54	6.01	5.77
22.	Dec 31, 2019	-0.15%	2.86%	3.57	3.63	-3.60
23.	Jan 31, 2020	12.09%	-0.16%	107.27	1.24	-11.56
24.	Feb 29, 2020	-6.53%	-8.41%	68.39	87.68	77.44
25.	Mar 31, 2020	-15.50%	-12.51%	297.27	181.30	232.15
26.	Apr 30, 2020	12.48%	12.68%	115.43	137.63	126.04
27.	May 31, 2020	7.93%	4.53%	38.34	12.78	22.14
28.	Jun 30, 2020	7.17%	1.84%	29.57	0.78	4.82
29.	Jul 31, 2020	4.01%	5.51%	5.19	20.77	10.38
30.	Aug 31, 2020	39.93%	7.01%	1,458.58	36.65	231.19
31.	Sep 30, 2020	-7.82%	-3.92%	91.39	23.77	46.61
32.	Oct 31, 2020	-7.58%	-2.77%	86.80	13.83	34.65
33.	Nov 30, 2020	5.83%	10.75%	16.71	96.07	40.07
34.	Dec 31, 2020	-9.47%	3.71%	125.53	7.61	-30.91
35.	Jan 31, 2021	1.36%	-1.11%	0.14	4.27	0.78
36.	Feb 28, 2021	-4.02%	2.61%	33.10	2.74	-9.53
37.	Mar 31, 2021	-2.14%	4.24%	15.02	10.83	-12.75
38.	Apr 30, 2021	8.71%	5.24%	48.60	18.40	29.90
39.	May 31, 2021	3.38%	0.55%	2.69	0.16	-0.66
40.	Jun 30, 2021	2.59%	2.22%	0.73	1.61	1.08
41.	Jul 31, 2021	-0.96%	2.27%	7.26	1.75	-3.56
42.	Aug 31, 2021	9.65%	2.90%	62.58	3.79	15.39
43.	Sep 30, 2021	2.24%	-4.76%	0.26	32.60	-2.89
44.	Oct 31, 2021	10.50%	6.91%	76.74	35.54	52.22
45.	Nov 30, 2021	-4.92%	-0.83%	44.25	3.19	11.88
46.	Dec 31, 2021	-10.82%	4.36%	157.65	11.62	-42.80
47.	Jan 31, 2022	-8.46%	-5.26%	103.98	38.58	63.34
48.	Feb 28, 2022	-9.50%	-3.14%	126.27	16.72	45.95
49.	Mar 31, 2022	0.85%	3.58%	0.79	6.89	-2.33
50.	Apr 30, 2022	-17.13%	-8.80%	356.13	95.04	183.97
51.	May 31, 2022	-8.92%	0.01%	113.64	0.90	10.10
52.	Jun 30, 2022	3.00%	-8.39%	1.58	87.33	-11.76
53.	Jul 31, 2022	11.50%	9.11%	95.32	66.56	79.66
54.	Aug 31, 2022	-15.16%	-4.24%	285.55	27.01	87.82
55.	Sep 30, 2022	-7.87%	-9.34%	92.21	105.94	98.83
56.	Oct 31, 2022	13.04%	7.99%	127.66	49.47	79.47
57.	Nov 30, 2022	-1.44%	5.38%	10.09	19.56	-14.05
58.	Dec 31, 2022	-17.26%	-5.90%	360.90	46.92	130.13
59.	Jan 31, 2023	26.68%	6.18%	622.35	27.27	130.28
60.	Feb 28, 2023	-2.60%	-2.61%	18.77	12.70	15.44
61.	Mar 31, 2023	22.11%	3.51%	414.96	6.51	51.99
62.	Apr 30, 2023	-0.71%	1.46%	5.97	0.26	-1.25
63.	May 31, 2023	12.61%	0.25%	118.18	0.50	-7.66
64.	Jun 30, 2023	-5.43%	4.71%	51.30	14.14	-26.94
65.	Jul 31, 2023	6.51%	4.85%	22.77	15.16	18.58
66.	Aug 31, 2023	-1.58%	-1.77%	10.99	7.42	9.03
67.	Sep 30, 2023	-8.43%	-4.87%	103.46	33.93	59.25
68.	Oct 31, 2023	-0.96%	-2.20%	7.28	9.93	8.50
69.	Nov 30, 2023	25.43%	8.92%	561.34	63.44	188.71
70.	Dec 31, 2023	4.46%	4.42%	7.43	12.04	9.46
71.	Jan 31, 2024	6.82%	1.59%	25.85	0.41	3.24
Total (Σ):				7,284.09	1,876.53	2,389.03

Show all

Variance_CRM = Σ(R_CRM,t–R_CRM)² ÷ (71 – 1)
= 7,284.09 ÷ (71 – 1)
= 104.06

Variance_{S&P 500} = Σ(R_{S&P 500,t}–R_{S&P 500})² ÷ (71 – 1)
= 1,876.53 ÷ (71 – 1)
= 26.81

Covariance_{CRM, S&P 500} = Σ(R_CRM,t–R_CRM)×(R_{S&P 500,t}–R_{S&P 500}) ÷ (71 – 1)
= 2,389.03 ÷ (71 – 1)
= 34.13

Systematic Risk (β) Estimation

Variance_CRM	104.06
Variance_{S&P 500}	26.81
Covariance_{CRM, S&P 500}	34.13
Correlation coefficient_{CRM, S&P 500}¹	0.65
β_CRM²	1.27
α_CRM³	0.52%

Calculations

¹ Correlation coefficient_{CRM, S&P 500}
= Covariance_{CRM, S&P 500} ÷ (Standard deviation_CRM × Standard deviation_{S&P 500})
= 34.13 ÷ (10.20% × 5.18%)
= 0.65

² β_CRM
= Covariance_{CRM, S&P 500} ÷ Variance_{S&P 500}
= 34.13 ÷ 26.81
= 1.27

³ α_CRM
= Average_CRM – β_CRM × Average_{S&P 500}
= 1.74% – 1.27 × 0.95%
= 0.52%

Expected Rate of Return

Assumptions
Rate of return on LT Treasury Composite¹	R_F	4.00%
Expected rate of return on market portfolio²	E(R_M)	13.82%
Systematic risk (β) of Salesforce Inc. common stock	β_CRM	1.27

Expected rate of return on Salesforce Inc. common stock³	E(R_CRM)	16.50%

¹ Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

² See details »

³ E(R_CRM) = R_F + β_CRM [E(R_M) – R_F]
= 4.00% + 1.27 [13.82% – 4.00%]
= 16.50%