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July 3, 2015 at 12:15 pm
Just a bit confused. “published betas are betas of a share”. Does betas of a share mean Equity beta?
Equity betas are betas showing the gearing effect along with the systematic risk of a share. And to show the business risk only, which is systematic risk, the equity beta needs to be ungeared ( which is the asset beta). Am I right?
John Moffat says
July 3, 2015 at 4:18 pm
Yes – the betas of shares are the equity betas.
And yes about the gearing also
July 3, 2015 at 4:31 pm
July 3, 2015 at 4:33 pm
And is it ok to ask qns relating to the lectures right here or should it be asked inn ask the tutor forum?
July 4, 2015 at 10:23 am
If the question relates directly to the lecture, then here is OK.
Better though is Ask the Tutor
May 20, 2014 at 2:02 pm
Great great thanks!. Makes sense after reading the lines carefully.lol
May 20, 2014 at 11:31 am
Just thinking that at what point do we now need to regear when appraising a project as example 11 only stopped at re-gearing
May 20, 2014 at 11:32 am
sorry i mean’t example 11 stopped at un-gearing.
May 20, 2014 at 11:42 am
If the examiner asks for a project specify cost of equity, he expects you to regear the beta and then calculate the cost of equity
May 20, 2014 at 1:28 pm
Ok thanks……….but re-gear using the company’s capital structure / the project intended capital structure?
Also,this lecture was able to break down the essence of ungearing.please can you help me out with the simplistic reason for re-gearing?
May 20, 2014 at 1:35 pm
We ungear a similar company to find the riskiness of the business and therefore the project (the asset beta).
To appraise the project we also need to take into account the gearing of the project (because the gearing in the project will make the equity more risky), so we need to regear the beta to get the equity beta.
If it is a normal NPV question, then we need to discount at the WACC. We usually assume that the gearing of the project will be the same as that currently existing in the company, so you regear the beta to get the equity beta. Use this to get the cost of equity. Then calculate a WACC for the project in the normal way.
If you are being asked for the APV, then regearing is not relevant (because the base case NPV assumes all equity and we are dealing with the gearing separately).
I hope that all makes sense
October 10, 2012 at 1:10 am
September 6, 2012 at 11:28 pm
April 5, 2012 at 7:23 am
The speed of current format is not as good as previous format. What should I do if I prefer to use previous format?
April 5, 2012 at 8:02 am
new format is actually more reliable, and you can watch it on your mobile.
what is your problem?
May 18, 2013 at 12:48 pm
HAHA HAHA! U got told!!!!
February 28, 2012 at 1:09 pm
July 26, 2011 at 6:56 pm
Going good. I am just refreshing my memory and I love this area.
May 11, 2011 at 11:17 pm
when appraising project when do we:
Ungeared and why?
ungeared and regeared and why ?
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