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Lectures – The impact of financing part 1 – Clarification – Example 1

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Lectures – The impact of financing part 1 – Clarification – Example 1

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  • September 3, 2019 at 12:29 pm #544470
    Anonymous
    Inactive
    • Topics: 5
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    • ☆

    Hello,

    First of all, thank you for your lectures! Great material and help.

    In the first part of the lecture “The impact of financing” around minute 12:30, you’ve been explaining the alternative solution of example 1 from the notes (chapter 12). You have mentioned that instead of using M&M equation we could use the Beta formula. However, there is no market return which I could use to calculate the market premium and at the end get the Beta.
    Is there any way around this issue?

    Regards,
    PJ

    September 3, 2019 at 2:20 pm #544493
    John Moffat
    Keymaster
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    • ☆☆☆☆☆

    You can only do it that way using algebra and letting the market return be X. As you work through the equations you will find that X ends up disappearing 🙂

    However I really would not spend time doing it – it takes longer and there is more chance of making mistakes.

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