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Hi sir,
1. Im confused, when do we use the m+m proposition 2 ?
2. I cant find the clue in exam question on which method to start, how do we know if the same gearing would be used for the project or not.. to decide which method to use etc.. Can you briefly clarify ?It really depends on the information given in the question. Using the MM formula is doing the same thing as using the asset beta formula. So if you are given betas (as is the case in most questions) then use the asset beta formula. If you are not given information about betas then use the MM formula.
As far as the gearing is concerned, you should be given information and I cannot give you a general rule. You will have to refer to a specific question for me to be able to explain.
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