CAPM and MM Combined OT

Question 1

CAPM looks at (risk)?

Answer 1

The business risk. Gearing makes business more risky

Question 2

What is beta of equity?

Answer 2

Beta of shares

Question 3

What is beta of assets?

Answer 3

Beta of business if no gearing

Question 4

Assumption for debt in CAPM and MM

Answer 4

Debt is risk free

Question 5

V_e

Answer 5

Total market value of equity

Question 6

V_d

Answer 6

Total market value of debt

Question 7

Compare risk in industry?

Answer 7

Compare the risk with another quoted company

Question 8

Asset beta?

Answer 8

Used to calculate the risk

Question 9

If company is currently geared?

Answer 9

The gearing will remain constant