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here are some notes
CAMP based on specific industry B equity risk which means industry is geared (finance through debt and equity)
CAMP based on industry B asset risk means industry is financed through equity only which is used when new investment in an unrelated portfolio is taken which company has no experienced before.BSOP mainly valued the company based the volatility in the market, if volatility is high value will be differ.
WACC, which can include both CAMP, BSOP or just only WACC to discount the final Budget values to reflect the Present value of cashflow
WACC seems to be best approach as it uses expected dividends to be paid and gives meaning rate to be used for future projects.
Dear Anees thanks for your answer, however
Adjustment of risk level depend on the cost of equity method and cost on debt as well, other normal factor includes market volatility risk and interest free rates, as well industrial risk include Beta asset and Equity Beta.
Factors which i discussed above are used to adjust the investment as per the industry risk level
although WACC is only for internal purpose when you have to include the market as well and need to revalue your investment as per the market risk level you have to include following methods
CAMP, BSOP or WACC for risk adjustment including inflation
So typically my question was the best method to cover all the factors.
Please answer within the scope thanks.
A new project only makes economic sense if its discounted net present value (NPV) exceeds the expected costs of financing. Before budgeting for a new project, a company must assess the overall level of project risk relative to normal business operations. Higher-risk projects require a larger discount rate than the company's historical weighted average cost of capital (WACC) would suggest. The opposite is true with low-risk projects, where the company must also work towards projects that are likely to add enough value to compensate for any risk, and that involves projecting profitability
