1) the model assist analyst to split total of security into systematic risk and unsystematic risk, under return the model allow analyst to predict future return of a portfolio by analyzing systematic risk which is the main determinant of return.
2)CAPM asist WACC in determining its cost of capital by its components such as;cost of equity(ks),cost of debt (kd) and cost of prefrence shares (Kps)
3) benifit-valuation of securities,capital budgeting
drawbacks-they use of perfect market where their is no transaction cost and taxes and investors are assume to borrow and lend at the risk free rate
May 21st, 2015
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