corportate finance question equity, finance, question, method

luda002

what does this mean?
What is the projects cost of equity using the pure play method?
Thanks in advance.

Dapper425

The pure play method is a way of finding the cost of equity by looking at what the cost of the project would be if it were a firm…confusing, i know.
Basically, look at the industry.
Unlever all of the comp betas to free them of capital structure.
Take an average (or do something else to arrive at what your MD wants).
Relever it to the structure of the project (typically called the “proposed capital structure” or intended somethingorother)
Plug this equity beta into the CAPM and
BAM
There’s your cost of equity

pimpineasy

dont worry about the pure play method. it only applies to the 09 lvl 1 exam  thankfully.
CFAi only added it to their texts to disadvantage those that are relying solely on their material.

ShooterMcCFA

good thing. Saw it in schweser practice volume 2(which I am discovering to be worse and worse). Possibly terrible

dmrktrading

I’m relying solely on the CFAI material, and after reading AF for a couple months I’m starting to realize I’m a small minority. So you’re saying the pureplay method of levering and unlevering is not worth memorizing the formula’s?? Thanks

homie

Sorry, that was a question, after rereading it I realized that kind of looks like a sarcastic ”thanks”.

JonnyKay

no worries. it doesnt appear i the Dec 08 corp finance LOSs. only the ones for Jun 09.
dont worry that you’ve learnt it. im sure its just been moved to lvl 2. they seem to move stuff from lvl 1 to lvl 2 alot so people dont rely on prior y texts  as if we arent spending enough to do this!!