DCF & WACC
What alternatives to CAPM exist for estimating the cost of equity?
Model answer
- Fama-French multi-factor models: the 3-factor version adds size (SMB) and value (HML) premia to the market factor; the 5-factor version adds profitability and investment factors.
- Arbitrage…
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- Two identical companies, one has more debt. Which has the higher WACC?
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