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1st working :1)publicity sub heading why did we get divided post tax cash flow benefit by wacc?4th working 2) we are given equity beta in question then why we have found asset beta and why that is used in capm formula instead of equity beta already given?
BPP REVISION KIT
1. Because of what is written in note 9 of the question.
2. Because the question specifically asks for an all-equity rate to be used (i.e. APV). The current equity beta includes the effect of the gearing, which obviously needs removing if we are using an APV approach.
I get the impression that you are trying to learn for P4 simply by attempting past questions – which is fine – and using this forum as a way of getting free private tuition.
We do not give free private tuition and I am therefore only prepared to answer questions on the basis that you have already watched all of our free lectures and have therefore studied before attempting questions!
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