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Hi John,
I’m working my way through past exam questions and Chrysos is the second question i’ve seen in quick succession that is using the M&M with Tax formula.
Now I may have fluked it getting this far without using it but is this the expected approach for section 1 questions?
How will i know whether to use it or not if I get a Reconstruction/Reorganisation question?Thanks in advance.
Needing to use that formula is actually not very common in the exam. More usually the question gives information about betas and then it means ungearing and regearing the beta.
The reason it was used here was partly because there was no information given about betas but also because the question effectively told you to use the M&M formula – the last sentence in the second paragraph under the heading “Additional financial information”.
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