l****q
发帖数: 767 | 1 Hi friends,
I have a question about capital asset pricing model equation. It's an
example on page B3- 87 of Becker CPA BEC (2007 edition). The example is:
"Assume that the Carlin Company wants to compute its cost of equity capital
using the CAPM formula and that the Treasury Bill rate is 7%, the market
rate is 16%, and the beta of Jasmine Corporation, which is considered to be
comparable to Carlin, is 1.2. What is the cost of equity capital for Carlin?
C= 7%+(16%-7%) X 1.2=17.8%
Therefore, a | t****g
发帖数: 715 | 2 "requires a 100% equity" does not mean that Carlin should invest all its
equity in this investment, but means that this investment could not be
funded by
liabilities.
Put it in another way, if Carlin decides to invest, then it could not borrow
money to fund this action, but needs to use its equity to do so (no need to
spend 100%, but only the volumn of the investment).
Introducing liabilities would affect the balance sheet, cash flow etc, while
this question does not talk about these issues, but
【在 l****q 的大作中提到】
: Hi friends,
: I have a question about capital asset pricing model equation. It's an
: example on page B3- 87 of Becker CPA BEC (2007 edition). The example is:
: "Assume that the Carlin Company wants to compute its cost of equity capital
: using the CAPM formula and that the Treasury Bill rate is 7%, the market
: rate is 16%, and the beta of Jasmine Corporation, which is considered to be
: comparable to Carlin, is 1.2. What is the cost of equity capital for Carlin?
: C= 7%+(16%-7%) X 1.2=17.8%
: Therefore, a
| l****q
发帖数: 767 | 3 I see. Thank you much!!! Your explaination is very well put. Thank you! | l****q
发帖数: 767 | 4 So, does CAPM also apply to investments other than pure equity investments,
and investments involving more than one typle of investment? |
|
