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FUBUKI Co – CAPM backwards ??

Forums › ACCA Forums › ACCA AFM Advanced Financial Management Forums › FUBUKI Co – CAPM backwards ??

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  • October 30, 2018 at 10:31 am #480214
    stonecold
    Participant
    • Topics: 4
    • Replies: 14
    • ☆

    I understand that we can use the normal CAPM formula ‘backwards’ to calculate the equity beta.
    14% = 4.5% + Beta x 4%.
    The gives an equity beta of 2.375.

    I am struggling to get Equity Beta of 2.375. Please can you explain or degear the below equation in few steps in order to get 2.375 Be?
    14% = 4.5% + Beta x 4%. = 2.375?

    October 30, 2018 at 12:49 pm #480221
    stonecold
    Participant
    • Topics: 4
    • Replies: 14
    • ☆

    Sorry! I got the answer

    14% = 4.5% + Beta x 4%
    (14% – 4.5%) = 4%Beta
    9.5%/4% = 2.375

    October 30, 2018 at 3:55 pm #480245
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54657
    • ☆☆☆☆☆

    I am pleased that you got the answer, but in future if you want me to answer then do please ask in the Ask the Tutor Forum (this forum is for students to help each other) 🙂

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