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Example in CAPM lecture (part 2)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Example in CAPM lecture (part 2)

  • This topic has 4 replies, 2 voices, and was last updated 3 months ago by John Moffat.
Viewing 5 posts - 1 through 5 (of 5 total)
  • Author
    Posts
  • February 12, 2025 at 11:06 am #715348
    matioszek
    Participant
    • Topics: 3
    • Replies: 3
    • ☆

    In the last example in CAMP lecture (part 2) with X plc and Y plc, I understand, that we un-gear the Beta of the similar company to the potential new operation of X plc.

    The gearing ratio of X plc is 0,4 and I do not understand why we use 50/50 ratio while regearing and calculating new project’s equity Beta.

    I thought that we would use the company X equity to debt ratio for the project andm apply it to the calculated asset Beta.

    Can you please indicate what is wrong in my reasoning? Thanks.

    February 12, 2025 at 7:02 pm #715357
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54679
    • ☆☆☆☆☆

    It is because part (b) of the question specifically asks for the situation if the project is to be financed 50% equity and 50% debt.

    February 12, 2025 at 8:43 pm #715359
    matioszek
    Participant
    • Topics: 3
    • Replies: 3
    • ☆

    Oh… apologies for a silly question, I did not see requirements in online version of notes, once downloaded, everything is clear.

    Thank you very much for your lectures and help.

    February 13, 2025 at 6:52 am #715370
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54679
    • ☆☆☆☆☆

    You are welcome 🙂

    February 13, 2025 at 6:52 am #715371
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54679
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
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