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Hi John,
May I know why the inflation started after Year 1? If my inflation started in Yr 1, does that mean all my calculations will be incorrect?
Thanks!
Hi John,
I have one more query, does “quoted beta” mean equity beta?
I am confused when sometimes the case scenario didn’t mention if it is equity beta or asset beta.
Is there any way I could differentiate it?Thanks!
Quoted betas are always equity betas (unless you are specifically told differently in the question).
The question said that “The following revenues and costs apply to the first year of operation:”.
That means that they are the actual cash flows at time 1, and that inflation only applies to later years.If you inflated in the first year then your answer would be wrong, but you would only lose a couple of marks if you had done everything else correctly.
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