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So here is my query, if
?e> ?a; WACC < Cost of equity calculated using ?a; WACC < Cost of equity calculated using ?e
is this right?
Sorry John
Beta equity > Beta asset; WACC < Cost of equity calculated using beta asset; WACC < Cost of equity calculated using beta equity
The equity beta will always be more than the asset beta (assuming that there is gearing in the company, otherwise the two betas will be the same).
The WACC is (in practice) going to be less than the cost of equity (assuming that there is gearing in the company, otherwise the WACC will equal the cost of equity).
This is because debt is less risky and debt attracts tax relief/The cost of equity is never calculated using the asset beta. It is always the equity beta that determines to the cost of equity.
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