Estimating the Cost of Capital
4 important questions on Estimating the Cost of Capital
What is the difference between volatility and beta i.e. What risks do they represent?
Beta = Market/ systematic risk
What is market capitalisation? How is it calculated?
MV = Number of Shares of i Outstanding * price of i per share
What does alpha refer to in regards to Security Market Line and trade managers?
if alpha >0 --> Stock performed better than predicted by the CAPM
if alpha < 0 --> Stock's historical return is below SML
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What is the difference between levered and unlevered beta? What does the unlevered beta assume?
Levered = Equity
If the company has no debt, the two betas are the same
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