Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Project asset beta
- This topic has 3 replies, 2 voices, and was last updated 9 years ago by John Moffat.
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- April 2, 2015 at 11:34 am #239914
Dear Sir,
I always make same mistake when derive the project asset beta. Appreciate if you could correct me with the rational behind.
After I find out the asset beta of the similar business Ba=0.89, why i should not straight away take the proxy co asset beta 0.89 to multiply with the % given(15%) in order to get project asset beta?
eg: Ba = 0.89 luxury transport
Be = 1.6 (15% luxury transport)
Ba = 0.80 non luxury transportApril 2, 2015 at 11:42 am #239915The overall asset beta is the weighted average of the individual asset betas of the two types of business.
Equity betas are higher than asset betas due to the gearing within the business.
Two things may help you. One is the free lectures on CAPM where this is dealt with.
The other is that the question you are quoting from is Question 1 from the December 2014 exam, and last week I uploaded a lecture working through this question.April 2, 2015 at 2:24 pm #239926Thank you for your help and guidance, I will definitely see your video.
April 3, 2015 at 12:13 am #239963You are welcome 🙂
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