How to Use CAPM for Project Analysis
mccarthy, Accountant, Ireland
CAPM is one of a number of methods used to calculate the cost of equity. The resultant cost of equity can be included subsequently in calculating the WACC of a company which is funded by both debt and equity.
The question is not whether CAPM is superior to WACC but to other possible ways of calculating the cost of equity to be put in to the WACC calculation.
CAPM could of course be used in appraising a project in an all equity companies.