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Friday, August 22, 2008


When cosidering the risk (beta), consider the risk of the project and not the risk of the company. Cyclical revenue or costs infers a high beta value because of variability.

On to topic 6. Cost of capital: in terms of the firm, it is the expected return it's investors expect (how much it costs to borrow). Capital structure: how the firm's capital is made up. Weighted average cost of capital (WACC) made up of debt, preference shares and ordinary shares. Preference shares rank ahead of ordinary shares. Dividends are fixed for preference shares.

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