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How to Use CAPM for Project Analysis?
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Reuben Ngeti Mwakisachi
6
Reuben Ngeti Mwakisachi, Kenya

How to Use CAPM for Project Analysis?

How do I use CAPM to gauge / decide whether to take up a project or not?
If you can, please give an illustration. How superior is CAPM as compared to WACC?

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  mccarthy
6
mccarthy
Accountant, Ireland
 

How to Use CAPM for Project Analysis

CAPM is one of a number of methods used to calculate the cost of equity. The resultant cost of equity can be included subsequently in calculating the WACC of a company which is funded by both debt and equity.
The question is not whether CAPM is superior to WACC but to other possible ways of calculating the cost of equity to be put in to the WACC calculation.
CAPM could of course be used in appraising a project in an all equity companies.

 

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More on Capital Asset Pricing Model
Summary Discussion Topics
topic Can Beta of a Stock be 0? And can Beta be Negative?
topic What is Beta? Explanation and a Few Remarks
topic Application of Capital Asset Pricing Model in Pakistan
topic Raw Beta vs Adjusted Beta
👀How to Use CAPM for Project Analysis?
topic Calculating Beta of Portfolio after Portfolio Change
topic Question - CAPM and Beta
topic CAPM is Irrelevant to Use
topic CAPM usage by Fund Managers
topic Why Sharp Increase in the Calculation for Betas
topic Are US Treasury Bills still Zero Beta?
topic Calculating Company Beta
topic CAPM Model and Calculating the Inflation Rate?
topic Concept of Marginality and CAPM
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topic Testing CAPM with Individual Stock Returns
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Knowledge Center

Capital Asset Pricing Model


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