What happens to most projects' appropriately priced costs of capital under the CAPM if there is...
What happens to most projects' appropriately priced costs of capital under the CAPM if there is a sudden increase to its market-beta?
| Its value decreases |
| Its value increases |
| Its value stays the same |
Homework Answers
Its value increases
Cos of equity using CAPM = Risk free rate + beta(market risk premium)
As you can see from the above formula, when the beta increases, the cost of capital will increase.
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