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COST OF CAPITAL
Ordinary equity (ke)
Capital Asset Pricing Model (CAPM):
Equity vs. Asset Beta – Example:
ABC (Pty) Ltd is a company operating in the furniture manufacturing industry
and is 60% debt funded.
XYZ Ltd, a company operating in the same industry, is 80% debt funded and has
a beta of 0.7.
Required:
Calculate the Beta for ABC (Pty) Ltd.
If you need to calculate Beta for an unlisted (private) company you will use a
proxy Beta of a similar listed company as your starting point.
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