Managerial Finance: The Nature of a Model and What Beta Measures

Managerial Finance
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Managerial Finance
The nature of a model is that it depicts the minimum rate of return that a firm is expected to earn to be able to meet the cost of financing its various investments, it offers the company the basis for the approval of new projects and the continuation of existing projects, it provides crucial information on the company’s risk, the minimum expected return on investment to the investor, through its calculation, and additional information on the optimal capital structure of the company when the company finally makes capital structure decisions based on the cost of capital model.
Beta measures volatility. The market beta is the market risk (systemic risk), which is a risk that is common to every player in the ...