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could you just explain when this would be used and do we calculate it the normal way??
thanks
This would be relevant when the project being considered has a different level of risk to that currently existing in the company.
If the project was more risky that the company is at present, then we would want a higher return.
You cannot be asked to calculate a risk adjusted WACC, but what you can be asked to calculate is a project specific cost of equity – to do this you would need to find the beta of the project and use CAPM.
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