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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Equity beta
Sir, May i ask when there is no changes in the business, the equity beta provided could be straight for use calculate cost of equity in order to find WACC is it?
However, when there is a changes in business asset beta had to be revised right? the equity beta being used in asset beta will it refer back to the question provided equity beta? The equity beta should used proxy or own equity beta?
thank you.
It is always the equity beta that determines the cost of equity.
To find the equity beta we take the asset beta and use the formula to then determine the equity beta.
To find the asset beta we find a company in the same business and use their asset beta. If we are given the equity beta of the similar company then we need to use the asset beta formula in order to calculate the asset beta of the similar company.
All of this is explained, with examples, in my free lectures on CAPM.