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Good Afternoon, My name is Nick!
I am really greatful for you guys, I have learnt a lot about Financial Management from this web site… Thank You… I have a question, I would like to ask you about CAPM… Can you please give an explanation about how the capital asset pricing model can be used to calculate a project-specific discount rate? I am having misunderstanding about the Porject Specific Discount Rate…
Thanks…What the examiner asks for in Paper F9 is for a project specific cost of equity, and I do explain that (with examples) in my free lectures.
If the project were to be entirely equity funded, then this would be the discount rate.
If the project were to be financed partly by equity and partly by debt, then having calculated the project specific cost of equity you would calculate a WACC using it in the normal way. However this is not really relevant until Paper P4.
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