Sir, we can calculate a different cost of capital for projects with different financial risk (marginal cost of captial) and different business risk by Capm but what if both(business and financial) are different for a project
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Business risk and Financial risk
And can you also explain the sentence "The consequence of making the assumption that debt is risk free is that the formulae tend to overstate the financial risk in a geared company and to understate the business risk in geared and ungeared companies by a compensating amount" (formula for geared and ungeared betas)
9y ago#2I am sorry, but all of this is explained in detail in my free lectures. I cannot type out all the lectures here :-)
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