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I understand when we should use WACC, when we should ungear, regear and when to use APV. that all makes sense
I also understand we can use CAPM and DVM to get the Ke. However, i dont really understand when we would use the lovely MM proposition 2 formula
In your lectures you mentioned, its very rarely examined, and we can of course use CAPM as a way to go around it. however, how will i know the signs of when to use it?
It is when you need to find the geared or unguarded cost of equity but are not given the betas in the question. If you are given betas (as is usually in the case) then use them because although you could use the MM formula it is so much messier 🙂