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Hello,
If the company is entirely equity financed, then it’s ungeared cost of equity would equal its cost of equity i assume?
There was an exercise where ?a was calculated and then used to calculate ?e to find Ke. And it was stated that the company was entirely equity financed.
Is that correct?
I can’t really answer you without seeing the full question. If it was a past exam question, or a question in the current edition of the BPP Revision Kit, then tell me which one and I will find it.
I am thinking that ?a is supposed to be the asset beta. It is normal to find the asset beta for similar company and then use this as the asset beta for the project we are considering. The equity beta is then calculated from the asset beta using the gearing in our company. If the company is entirely equity financed, then the equity beta will be the same as the asset beta.
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Can’t seem to find the question now but you solved my question thank you very much!
May I ask some advice on possible published non yet examined examiner articles if any?
You are welcome.
I think all of the articles have been examined, but regardless you should still go through at least the most recent 10 articles.
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Thank you very much!
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