Strengths and weaknesses of capital asset pricing model, Financial Accounting

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Q. Strengths and Weaknesses of Capital asset pricing model?

Strengths

- Gives a risk adjusted discount rate precise to the project's activities.

- Books of betas are readily accessible.

Weaknesses

- Merely appropriate for well diversified shareholders.

- Published betas are computed by looking at past share price movements. The discount rate is therefore of limited use for future project appraisal.


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