UNGEARED COST OF EQUITY

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March 26, 2022 at 7:33 am #651898
shaunak22
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if we use equity beta in CAPM model we get geared cost of equity

DOUBT – If we use asset beta in CAPM model will be we ungeared cost of equity?
March 26, 2022 at 9:18 am #651914
John Moffat
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Yes. If there is no gearing the equity beta is equal to the asset beta. Therefore using the asset beta gives the cost of equity if there is no gearing.
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