Answered: Briefly discuss capital asset price…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 1DQ: What are the principal objections to the use of the average rate of return method in evaluating...

See similar textbooks

Related questions

Question

Briefly discuss capital asset price model from the standpoint of investors and managers.

Expert Solution

Step 1

CAPM from standpoint of managers :

Capital asset pricing model is of high value for financial managers which is the reason behind the fact that is it widely used and accepted. The CAPM model takes into consideration systematic risk factors and is very easy to compute. Cost of equity constitutes a major part of weighted average cost of capital, which is used by managers to evaluate the project and the company itself. Hence, from the viewpoint of managers we can conclude that the capital asset pricing model is of vital importance.

Step by step

Solved in 2 steps

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions