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I will sit AFM exam (CBE) on Mar 2021. For spreadsheet one, is it necessary to write down the figure in the question first and then calculate? For example,
1.Equity beta= 10%
Risk free rate=5%
Market premium=2%
Cost of equity=5+10*2=25%
Or
2.Cost or equity=5+10*2=25%
Is it method 2 acceptable?
Please advice.ThanksEither would be fine, but for safety (since you could have accidentally have picked up the wrong figure from the question) I would use method 1, but then create a formula on the spreadsheet to do the calculation of the cost of equity.
That was you would still get marks for trying to do the right thing even if you had picked up one of the figures wrongly.(Incidentally, beta is not a % – in your example it would just be 10.0 )
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