Cost of capital MJ18 Tippletine

Tippletine: We are not calculating the cost of capital. Because we are calculating the APV, we need the ungeared cost of equity, which is calculatedlated using the formula.

Robson: Again, we are calculated the APV and therefore discount at the cost os equity as if no gearing. If there is no gearing then the equity beta will equal the asset beta (because there is no gearing risk).

Issue costs: Correct there is no need then to gross up. (In some questions it is not made clear where the issue costs are coming from. In that case make an assumption but, as always, state your assumption.)