Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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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.
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