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J12 Q4 a Tisca co

Hhuma4y ago
Sir in this case why they have multiplied Elfu Co component asset beta with 0.25 and Elfu Co asset beta of other activities with 0.75?
John MoffatJohn MoffatTutor4y ago#1
According to the question, 75% of Elfu's equity is in 'other activities' and so 25% is in 'component production'. It is being assumed sensibly that it is the equity that is carrying the risk.
Hhuma4y ago#2
Instead of equity can we also assume debt carrying the risk and so use 20% and 80%?
John MoffatJohn MoffatTutor4y ago#3
No. In theory debt is risk free. It is equity that carries the risk.
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