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avto dec 03

Mmansoor9y ago
in this question, we use CAPM to get the 'cost of capital'. but capm gives us Ke, cost of equity. shd we not be using WACC here?? can u pls explain sir
John MoffatJohn MoffatTutor9y ago#1
But how exactly are you going to calculate a WACC? There is no information about the capital structure or the financing. You are given the beta of the investment and you have no choice but to discount at the rate applicable to that level of risk.
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