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avto dec 03

This topic has 1 reply, 2 voices, and was last updated 8 years ago by John Moffat.

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June 2, 2017 at 1:47 pm #389720
mansoor
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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
June 2, 2017 at 4:42 pm #389758
John Moffat
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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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