FM-INTRODUCTION OF COST CAPITAL

[00:00:03]Yes sir.

[00:00:03]>> Good evening sir.

[00:00:05]>> Hi good evening.

[00:00:07]When I say you are in this class then you don't want talk.

[00:00:15]Okay thank you.

[00:00:18]So um cost of capital.

[00:00:24]So you're supposed to get this material before the class.

[00:00:29]You get it after the class now. Is it only let me just Okay.

[00:00:42]So, okay.

[00:00:50]What take us to cost of capital is one of the objective or one of the function of a financial manager.

[00:01:07]One of the words, one of the objective of a financial manager. Like I said, ignorance. I always say ignorance is not an excuse.

[00:01:21]I did not. It's because of this. I didn't have the this. It's because of this. I didn't have this.

[00:01:28]This there's a course I need to write um a professional exam actually.

[00:01:37]Then when I check YouTube, I saw all of those guys, Pakistan guys.

[00:01:44]The way they explaining that that topic, that particular course, it's like I need to it seems I need to enroll to that class. So guess how much just for one course say is I think is maybe 83,000 just one just one course. Just imagine you want to do like three course three courses with them. How much will I pay?

[00:02:13]I'll pay more and no discount nothing you know there will give you discount discount nothing you have to pay and it's not that the money is there but I have to just go and look for it.

[00:02:32]imagine you pay huge amount of money for exam then for you to pay 83,000 be this thing you're not like ah no no I will find a way around it ah you go deep right go very very deep so that just it okay so please whichever way you want to use to get access to the resources that make you to move to another level. I beg find a way around it. That is what I will just say. Okay. Yeah. And um I know it's not easy. It's not easy for everybody but but we just have to get this done. Okay. Now >> cost of capital one of the at the end of this class you will understand by the end of this topic you should be able to use the dividend valuation model.

[00:03:42]I'm taking coffee. So you can you can order for your coffee. I will pay. Okay.

[00:03:52]Okay. Okay.

[00:03:55]So, use the dividend valuation model to measures the value of equity.

[00:04:07]You should be able to use the cost of equity using the dividend valuation with and without good equally.

[00:04:20]You should be able to calculate the post tax the post tax irredeemable and a redeemable depth.

[00:04:32]Then the cost of convertible bonds which is problematic.

[00:04:39]We'll break it down right demystify it here. Then the weighted average cost of capital, right? Weighted average cost of capital.

[00:04:57]Now cost of capital is a sources of finance. It is a cost to a company.

[00:05:12]Cost of capital is a cost to a company is when the company want to source for finance as part of the function of a financial manager.

[00:05:24]It is a cost to the company while it is a return to the older class.

[00:05:36]When you buy shares in Jco Bank, right?

[00:05:43]JCO Bank will pay you. It is not mandatory for them anyway.

[00:05:48]It becomes a cost to them for them to pay you.

[00:05:53]When you buy a commercial paper from Dangote, it is a debt instrument.

[00:06:01]They will pay you back your interest and principle. So they will use those money to finance their business.

[00:06:10]So it is a cost to the company, right? It is a what? It is a cost to the what?

[00:06:18]to the company.

[00:06:20]Now if it is a cost to the company why it is a return to the holder those people those guys who contribute capital for you to finance your business.

[00:06:36]So we'll be looking at cost of capital in the perspective of a company cost.

[00:06:44]Okay.

[00:06:47]when you migrate from this level to professional level we'll meet in SFM class right bond where we'll be looking at cost in the perspective of another uh aspect right you will get there now what is cost of capital now I will give you in my definition will have two elements and that is the reason why we will not divide cost of capital into two.

[00:07:19]Cost of capital is the required return, rate of return that investors are expecting from their investments.

[00:07:36]One, investors are expecting from their investments. one and it is requiring the company to pay back interest and principle to the debt holder.

[00:08:01]Now you could see that from my definition I said is the required rate of return that investors are expecting. One, who are these investors that are expecting return from their investments? Who are they? They are equity investors.

[00:08:24]When you buy shares in digital bank today, you are part of investor, equity investors, equity shareholder, right?

[00:08:38]What you are doing is you are expecting a return from your investment which could be whether dividend or capital appreciation we'll get there.

[00:08:52]So you so the require the the expectation you are expecting something from your investment.

[00:08:59]It is not compulsory for JCO to pay you dividend or for their market price to appreciate. No, you are only expecting it and that is the reason why you are equity holder and it is requiring the company to pay back the interest and principle to who?

[00:09:26]To who? to the ba to the depth order that is depth class it the depth order are not expecting you must pay them back if I buy dangote commercial paper and dangote says oh they will pay me interest of 10% per hanum or per per hanum or for four Yes, it is requiring them to pay me. I'm the debt holder. I'm the owner of the debt. I'm the investor.

[00:10:04]They will pay me back my interest and principle as at the date of maturity.

[00:10:11]Now, we could now say that cost of capital is now divided into two from the definition of cost of capital class.

[00:10:22]From the definition of cost of capital, I said it is requiring or it is it is the required rate of return that investors are expecting from their investment.

[00:10:35]One, who are these investors who are expecting something from their investment? Equity holder. If you buy shares in a company, you are expecting.

[00:10:44]It is only when the company make a profit before they can pay you dividend.

[00:10:48]If they don't make a profit, Mhm. your money is gone, right? Or capital appreciation.

[00:10:55]The next one is depth. If I buy a depth instrument, I pay maybe 50,000 to Dangote, they will pay me back my money. It is a debt to the company. They will be paying me. So, they will pay me back my my interest and principle. So we could say from the definition of cost of capital that the cost of capital is divided into two the equity and the depth.

[00:11:26]Okay. But let me quickly explain what investors are expecting.

[00:11:32]Amarachi she invested in Ju bank shares for for the purpose of this class.

[00:11:42]Now the expectation are two she may decide to go with dividend or capital appreciation right as an investor right dividend there are two don't let me I don't want to explain when we get to dividend policy dividend they may say oh may say oh for the purpose of this class want to pay 15 per share. Oh, 15 per share. Oh, that makes sense. So, maybe she has about 20,000 units and she said, "Oh, that will make sense or more. I will get money." Makes sense. So, she may decide, she may prefer dividend. That is her expectation.

[00:12:31]Another investor is she can say, "Oh, no.

[00:12:38]I don't want dividend.

[00:12:40]I want a capital appreciation.

[00:12:46]What is the capital appreciation?

[00:12:49]We are talking about an increase in the market price. Now a practical illustration.

[00:12:58]She buyes when the market price is 50 naira per share and she have maybe 10,000 NRA units. 10,000 NRA divided by the 50 give you the numbers of units like that. So when the share price is 50 naira per share she bought now in maybe in two weeks time the share price becomes 100 that is 50% increase she will say oh as a short-time investor she look at it depends on your investment goal she will quickly sell her shares is because she has already in two weeks time she has like a double she quickly sell that means I a type of investor is based on capital appreciation not dividend so we have different type of investors either you go dividend with dividend or capital appreciation class are you still with Are you still with me?

[00:14:24]>> Yeah.

[00:14:26]>> Okay.

[00:14:27]If this is established, examiner may ask you question on the reason why cost of equity is usually greater than the cost of depth or higher than the cost of depth.

[00:14:48]Examiner may say discuss cost of equity and depth class. You don't need to come. You should be able to write like two like two pages comfortably.

[00:15:05]Yes. Just think about it in the perspective of an investor.

[00:15:11]That is what you need.

[00:15:13]Now equity holder are risk taker.

[00:15:19]We could say equity holder are risk taker.

[00:15:24]Why? Because they are expecting something from their investments.

[00:15:32]It is not it is only when they make profit they will pay. It is only when market price increase before they will get money. Now the market price may actually drop. Right? So what will they do? They will not do anything. They are risk taker. The debt holder are not a risk taker. One you could say that equity holder are expecting dividend.

[00:16:00]Why depth holder are not expecting dividend but it is requiring the company to pay back their interest and principle at the date of maturity.

[00:16:14]You could also say that during liquidation if they want to liquidate now today who are the first people to be settled who are the first people the depth holder. How if you even check your income statement even before the liquidation let's say they want to liquidate today is the depth holder.

[00:16:34]Don't worry when we get to when you move from this level to professional level in SFM class you will take will take a topic called reconstruction right we'll get there so you look at it they are the first people to be paid the depth holder they will pay them first right then they will now pay the shareholders what's left even if it is If nothing remain then will get anything. They will not even get anything.

[00:17:09]It's part of the reason why cost of equity usually greater than the cost of debt. The cost of equity the return as an investor the return is usually higher if the market makes sense. Yes. Than than than depth than bond which is a depth instrument.

[00:17:32]Right. The return that bond will give you in two years, equity can give you within eight months depends on the market.

[00:17:42]Right? So the the return is actually you know the equity return is actually more you know more juicy than uh debt right but the cost is usually higher to the company right than what than the cost of debt.

[00:18:01]So examiner may tell you that oh discuss this. So you should be able to like think like an investor look at it in the perspective of an investor. Okay, this is this this will take dividend equity order. These guys are not risk taker.

[00:18:17]These people are expecting dividend.

[00:18:19]These people requiring them during liquidation. You know, we have to pay these guys. You know, then you will see the reason why cost of equity is usually higher than the cost of depth when we get towards illustration. Class, I hope I'm communicating.

[00:18:36]Are we tired?

[00:18:40]Are we tired?

[00:18:44]>> No, sir.

[00:18:44]>> No, we are not tired.

[00:18:49]>> Okay.

[00:18:50]So, we need to move.

[00:18:58]Now, from the definition of cost of capital, it is divided into two. the requiring that the the equity holder are expecting and the debt. So we could say cost of capital is divided into two right cost of capital is divided into two equity and depth right equity and Can someone hear me?

[00:20:54]>> Yeah.

[00:20:56]>> Yes.

[00:23:51]What's up?

[00:25:30]Please confirm. Can you hear me?

[00:25:34]>> Yes, we can hear you.

[00:25:36]>> Yes, we can hear you now.

[00:25:39]>> Okay. Please confirm if you can see my screen. I'm sharing my screen now.

[00:25:44]>> No, we can't.

[00:25:47]That's for >> Yes, we can see now.

[00:25:56]>> Okay. Okay.

[00:25:57]>> I can see it from my email.

[00:26:00]>> Okay. Okay, that's fine. Just um Okay. Um we'll just take uh equity today then tomorrow.

[00:26:15]Um tomorrow um dep Like can you see my screen like can you see it very well? Like >> yes very well is moving.

[00:27:08]>> Okay.

[00:27:17]Okay, just a minute. Check something.

[00:28:31]Okay, let's move on.

[00:28:33]So where are we? So um cost of capital is divided into two right.

[00:28:46]Is this not okay? Let's move on like this. Let me just Okay, cost of capital is divided into two. We have the cost of equity and the cost of depth. So we'll start with from the definition.

[00:29:21]So we start with the cost of equity.

[00:29:26]Now in calculation of the cost of equity is divided into two.

[00:29:35]Of course we have the one of capital structure of modi ailia but miam she will take that part of capital structure all of those portfolio stuff right so please make sure you follow her class very well okay and ask question she's very good I I believe she she she always deliver so please make sure you ask question So the cost of capital the cost of equity right we have cost of equity so we'll start with the cost of equity now under the cost of equity how do we estim estimate cost of equity under equity sorry there are two methods the dividend valuation model and the capital asset pricing model capm capm there are two methods of estimating cost of equity examiner will not tell you that you should use capo or to use dividend valuation model sometime it is the ingredients given to you in the question that will determine which of the method you will use to determine the dividend valuation model or the capital asset pricing model.

[00:31:05]Now, under the dividend valuation model, there are two methods you can use to estimate the good rates.

[00:31:18]There are what? There are two methods you can use to estimate the good rate.

[00:31:27]There are two methods to estimate what?

[00:31:30]to estimate the good weight.

[00:31:34]Now the first method is the dividend without growth.

[00:31:39]Like I said from the question you will know if there is a growth in dividend or not is the question that will determine which of this method you are to use under the dividend valuation model.

[00:31:52]Then we equally have the dividend with goods. So what it means is that okay we'll get there. So we have the dividend without goods and the dividend with goods under the what under the dividend valuation model that is the method of calculating the cost of equity. So pick it one after the other now. Okay.

[00:32:19]The two is cap right. to pick the dividend valuation model without goods.

[00:32:28]Right? Now the dividend valuation model without goods. What does that means class? You can see that this is under the dividend valuation model without goods.

[00:32:44]Right? Now what does that means? It means that investors dividend will receive a custom dividend to perpetuity.

[00:32:55]Meaning that if Amarachi invests in JT bank shares for instance for the purpose of this class, the dividend she received in 2024 will be the same she received in 2025 will be the same she received in 2026. We could say there's no dividend.

[00:33:13]There's no good in the dividend. That is dividend without good.

[00:33:19]Now how do we calculate the cost of equity using the dividend valuation model without good? Like I said, whether it is dividend valuation model or CAPM, whether it is dividend valuation model without goods and with good. It is the question that will determine which of the two you will use.

[00:33:47]Right? It is the ingredients given to you in the question or the items given to you in the question will determine which of the two methods to be used.

[00:33:59]Excuse me. Now dividend valuation model without goods.

[00:34:04]How do we estimate the cost of equity?

[00:34:10]Remember the cost of equity is a cost to the company. It is a return to you that you provide that you buy shares in the what in the company.

[00:34:24]Okay. So D1 divided by NV K is the cost of equity.

[00:34:37]D1 is the current dividend from the formula.

[00:34:44]MV is market value SD or market price SD.

[00:34:57]Right? In some in some literature you will have market price SDF or market value SD anyone.

[00:35:13]So what is the meaning of market value SD?

[00:35:18]In the question examiner will say the dividend has been paid. Oh.

[00:35:26]When the examiner say oh the dividend has been paid that means the market value given to you is market value sd.

[00:35:38]So you can use it directly from the formula. So you see D1 current dividend divided by the what the market value SD because the examiner has given you that giving you that I've said that okay the dividend has been paid. So when the examiner said oh the dividend has been paid that is market value SD and from our formula what we need is market value SD or market price. So you can use it directly and you what you get your cost of equity.

[00:36:11]But when the examiner say oh the market the the dividend is there to be paid and the market value is 20 NRA.

[00:36:23]If the dividend is yet to be paid that is market value c the market price given to you in the question is market value c because the dividend is yet to be paid but what we need in our formula class what we need in our formula is market value sd not comed the examiner says that the dividend is yet to be paid And the market value is 20 NRA or cover.

[00:37:01]The current dividend is 10 cover right now. And the examiner says this dividend is there to be paid.

[00:37:14]Right? That means the market value given to you is the market value cream div.

[00:37:28]We need to get market value SD because what we need in our formula is market value SD not market value Kim D of 20 co.

[00:37:40]So you can see the market value given to you in the question which is the price that you now le your outstanding dividend that is yet to be paid. That will give what market value is so you can only use this when the examiner says the dividend is yet to be paid. That means the market value given to you is com.

[00:38:06]Right? What you need to do for you to get the market value SD you will say the market value KB then you less the outstanding dividend but if the examiner says oh it is SD fine just use it direct that they've paid it just use it and move on okay class are we still together are we still together please sir yes okay Now if that is established this is dividend valuation model without goods that means as an investor you will receive a constant dividend till perpetuity.

[00:38:54]Now if this is established we need to move to the what dividend with goods.

[00:39:00]Plus we are still under the dividend valuation model. Under the dividend valuation model there are two method of estimating cost of equity.

[00:39:12]The dividend without goods and the dividend with goods.

[00:39:17]is the information given to you in the question that will determine whether it is dividend valuation or with goods or without goods.

[00:39:28]Now if they say dividend valuation grow good model that means that you as an investor you will receive a separate dividend to perpetuity that means it is dividend with good right you will receive what different dividend let's say for instance that means there will be a good in your dividend let's A practical illustration let's say she invested in digital bank shares let's say they paid for instance in 2024 they paid 20 cobble 2025 paid 30 cover right so we could say there is a good in dividend is that not so we could say there is a good in dividend that that means it is dividend valuation model with growth Right.

[00:40:30]There is a good you deterine the good.

[00:40:33]Okay. New minor sold you know to determine that oh there is a good because you see that they pay 20 co they pay 30. That makes sense. So that means investors will not receive a constant dividend. Dividend will grow.

[00:40:50]Now the next question is how do we determine the good trait? That will be the next question. How do we what? How do we determine the good weight? Right.

[00:41:05]>> How do we determine the what? The good weight, right?

[00:41:11]How do we determine the sorry the cost of equity using the dividend valuation with goods? This is the formula.

[00:41:20]Wait for >> D1 1 + good fit divided by the what? Market value.

[00:41:32]Market value, right? Market value SD.

[00:41:41]Then when you divide this, you had your growth rate. What is market value SD class? It means that the dividend has been paid. The examiner will explicitly state that whether or not the dividend has been paid. Don't forget what we need is market value is t that the dividend has been paid. Right? Now D1 1 + G divided by market value SD plus. Now the good rate will not be given to you in the question under the dividend valuation model with good. The examiner will not give you the good rate. Just prepare your mind that you'll be the one to estimate the growth rate. Now I will give you a practical illustration of market value SD again. Right?

[00:42:34]If a company declare dividend today today, let's say they declare 20 cobble today, the market price as of today, right? The market price as of today is market price come div because they are yet to factor in what dividend.

[00:42:58]I know we we will have some investment banker here maybe investment analyst, richest analyst all of those guys you know.

[00:43:07]Now after that but if the company declared dividend today 20 the market price you see in the Nigerian stock exchange market is what class is comb div let's say 50 co is the market price so you will observe that I don't know as an maybe investment analyst or anything if If you observe, you will see that immediately they paid the dividend. What will happen to the market price? The market price will fall reduce.

[00:43:48]So if it reduce what it means is that the market price that as that time the market price is what it is SD because the dividend has been paid. So if the market price is SD so new investors will now come in since there's a reduction in the market price everybody will like to go and buy shares because the market price is low. Some investors they will look at it that because of the market price is low it's an entry point to them. So they they like they are using what we call um uh they using what we call uh technical analysis but not fundamental right but we'll get there maybe what is it called mam she will I think she will explain all of those all of those aspect in in practice so that you will understand the technical and fundamental analysis. Okay. So my point here is I just want this thing to stick so that you will not cram like this we are next gen like it's practicable it is something that you can remember right you don't need to cr anything okay just understand financial management okay now how do we estimate the good fit don't forget that if the examiner says the the dividend is yet to be paid that is com div. We have to say oh market price com minus the outanding dividend so that we get our what market value is div. Is that not so? Now how do we estimate the good fit? Because let me prepare your mind the good fit will not be given to you in the what in the question.

[00:45:39]So there are two methods of estimating good rates class. When you want to estimate good fits, there are what?

[00:45:51]There are two methods of estimating good rate. Don't worry, you will get the material immediately after this class.

[00:45:57]Okay? Sorry, apologies.

[00:46:00]There are two methods of estimating good rates.

[00:46:06]extrapolation and the god's good model plus still the method to use whether extrapolation or codons depends on the question given to you by the examiner if you want to estimate the good extrapolation.

[00:46:28]Another name for extrapolation is equivalent annual goods or a geometric mean class. You can only use extrapolation when the examiner give you a series of dividend when you have a series of dividend like this. So you can use extrapolation to determine the goods rates under the dividend valuation model with goods.

[00:47:00]It is only when you have a series of dividend. Now what is the formula for calculating the good using extrapolation? Either it is known as extrapolation aent grow or what geometric mean? Examiner can tell you that oh is geometric mean? Mhm. We know geometric mean.

[00:47:26]Okay.

[00:47:28]Now what is the formula? the current dividend divided by the ears n minus one numbers of years minus n minus one.

[00:47:39]Now you can only use this method to estimate good rate when you're given what a series of dividend.

[00:47:47]Okay. So what is the current dividend?

[00:47:50]The current dividend is 20 cobble.

[00:47:54]Now the earliest dividend is what is two carbon ear base dividend and you say n minus one class do you know the reason why they normally minus one from this now if you look at it from 2k to 5k there is good excuse me from 5k to 20k there is good now you could see that there is no good in 2023 because no 2024 and that is the reason why you now see 3 minus one that is true. There is a good fit from 2021 to 2022. There is good from 2022 to 2023 but what does 2023 to 2024? No good because they yet to give us 2024 information and that is the reason why you will now see n minus one.

[00:48:51]Okay. So you can only use this method to estimate good when a minute You can only use this method to estimate growth rate right when there is there is a series of dividend. Okay.

[00:49:38]Now another method you can use to estimate good fre is Gon's good model.

[00:49:47]The god's good model make use of accounting profit earnings and we should not forget accounting profit is subjective right is actually what is subjective so god's go model make use of what ends so what is the formula for calculating good fit under the what under the god's go to model this is it g equals to r * where G is the good in the future dividend good G is equal to the good rate your H is the accounting rate of return or return on investment in your financial reporting if you want to determine return on investment return means your profit after tax investments the capital employed and you could define capital employed as net asset as total asset total equity.

[00:50:55]But in financial management what we what you will see often time is this formula is this second one here highlighted in yellow.

[00:51:07]The profit after tax divided by the what? opening shareholders funded.

[00:51:15]Now, how do we determine opening shareholders fund? Don't worry, we'll get there. Why? That is equity, right?

[00:51:22]That is equity. So, you will use this formula to get your what? To calculate your R.

[00:51:28]So, what will be your B which is what? The retention ratio.

[00:51:36]B is retention. Retention means retain.

[00:51:39]Retain. If they say something is retained that is retained earning. If you want to in your financial reporting if you want to calculate um retention or retain any is profit after tax minus your dividend.

[00:51:55]Okay.

[00:51:57]So ratio now ratio class ratio you now say profit after tax minus dividend divided by profit after tax that will give retention ratio.

[00:52:10]Then you can say half * B right half * B that will give us the good rates.

[00:52:23]Now what take us to the method of estimation of growth rate is the dividend valuation model with good. The examiner will not give you good traits.

[00:52:35]to be the one to estimate your good trait using either extrapolation or the god's goods model.

[00:52:47]Right?

[00:52:49]So the problems of god's good model make of accounting profits like this like this like this you went through the problems of what of the school if the examiner even in fact if the examiner even asks you just think of abnormality in the formula as well as what in the accounting profit right so these are the two methods to estimate um cost of equity under the what under the dividend valuation model the dividend without and the dividend with good the method to use will depends on the what is given to you in the question remember don't forget that the good rate will not be given to you have to do what you have to estimate the good rates okay now Another method of estimating cost of equity is the capital asset pricing model which is cap.

[00:53:58]We'll stop here is what is the capital asset pricing model. Where is it? Where is it? Where is the cap?

[00:54:07]Right. Is the capital asset pricing model.

[00:54:12]Like I said the method to use whether the capital asset pricing model whether the dividend valuation without or with good will depends on the ingredients given to you by the what by the okay so remember that cost of equity it is a cost to the company while it is a return to who to the investors the equity holders.

[00:54:44]Okay. Now for those who build model you see all of those things in valuation right? You see all of those things in what in valuation actually. So another thing is before I forget in practice the dividend valuation model can only be used to estimate cost of equity. In practice, the dividend valuation model can only be used to estimate cost of equity if if the company is a dividend paying company. I think last I think is not last year. I think I wrote on on anything on companies that actually uh pays dividend and not right. I don't think we don't I don't think we have that company in Nigeria that does not pay pay dividend.

[00:55:43]Right?

[00:55:44]So you can only use cost of in practice you can only use cost of equity uh dividend valuation model to determine the cost of equity if the company is a dividend paying company. Just imagine a company that is not dividend paying company and you want to estimate cost of equity.

[00:56:03]What will you use to calculate the dividend?

[00:56:07]So it has to deal with what a company that pays dividend.

[00:56:14]So the capital asset pricing model is the formula.

[00:56:23]K E equals to RF.

[00:56:28]RF is the risk free.

[00:56:32]B here is equity better.

[00:56:35]This is market return.

[00:56:38]This is risk free.

[00:56:41]So when you subtract this, you multiply by your equity better plus what? Plus the rex free, right?

[00:56:55]or cost of equity risk-f free plus equity better you multiply by risk premium why is it all if the examiner give you risk premium use the second one just say risk premium times the equity better then you plus your risk free if the examiner give you risk premium well when you are given Because you are giving the market return fine less your market return from your risk premium risk-f free and what does that means I think uh Mariam she will provide explanation on that when you get to portfolio theory and she will I know she she will do justice to portfolio theory yes so what we'll pick here is RF the risk It is assumed that investors invest in a risk-free asset.

[00:58:02]>> If you buy shares in a company, is it risk- free? Is an assumption actually in capital asset pricing model. Don't worry, we get to portfolio theory. you will see the assumptions of campaign. Okay. Now examiner may say treasury bill instead of risk- free or government bond. So when you see risk-f free when you see treasury bill that is risk free. When you see government bond that is risky because it is assumed that uh uh investors returns are what are risk-f free market return is market return right market return okay is a risk premium risk premium. This is equity beta better factor equity beta.

[00:59:05]It measures systematic risk. That is your equity better. And what is systematic risk?

[00:59:16]A risk that are not avoidable.

[00:59:19]She will also take you systematic and unsistatic under the under the portfolio theory. But equity better measures systematic risk and systematic risk are risks that cannot be avoidable like unemployment, exchange rates, inflation and so on. Okay.

[00:59:48]So I think we're I'm done with this part of equity. In our next class we'll check on the cost of depth.

[00:59:59]Okay.

[01:00:03]Is interesting right class.

[01:00:07]Oh >> yes.

[01:00:12]>> Okay.

[01:00:14]That's fine.

[01:00:15]If you have question in this class, if nobody say they think about that your boyfriend break your heart, you're not supposed to get question but it's fine. Or you use uh while you're in class chatting often and often we call we talk after class instead of you to block them.

[01:00:50]Block all those distraction then after the class then you can unblock them.

[01:00:57]Okay.

[01:00:58]So you can ask question and just I'm just kidding. Just ask questions.

[01:01:04]Oh, I need to go.

[01:01:09]So, thank you so much everyone for joining.

[01:01:13]Um, in our next class, we'll talk about the cost of depth.

[01:01:19]Please make sure you go back to the YouTube, okay?

[01:01:23]YouTube, whether your dashboard, whether anywhere, whether if you don't have the material, fine. Just just find a way around it. I don't know. Just find a way around it.

[01:01:33]Okay.

[01:01:35]So permission to fall out. Is it granted?

[01:01:53]When are we getting the notes, sir?

[01:01:56]>> No, after the class. Get it. Get it.

[01:02:02]>> Just check.

[01:02:02]>> Just check the mute your mic.

[01:02:11]>> Mute your mic.

[01:02:13]>> Just check the the portal, right? So after the class, I I'll update it now.

[01:02:20]Okay. just in five minutes I will get it so you have access to it again.

[01:02:27]So Mari do you have question for me now your question I won't take any other person question just a question first before all other questions okay thank you all right yeah you're welcome so thank you so much everyone for joining FM remember that grace does not work in isolation, right? You have to inconvenient yourself um so that you can be able to achieve the objective. Okay? And um FM is not difficult. We are next gen. We'll make we'll make it simple is what we do on a daily activities actually. So we have it we understand the system. We understand the market. We understand all of those.

[01:03:24]We break it down. Just make sure you are consistent with your lecture. Ask question. Okay, ask questions. So don't worry about FM. You're good to go. Okay, and any other courses you you join us at NextGen Professional Associates, right?

[01:03:40]Because we are Next Gen. Okay. So, thank you so much everyone for joining and enjoy the rest of your evening and bye for now.

[01:03:50]>> Thank you, sir.

[01:03:52]>> Oh, thank you.

[01:03:53]>> Thank you so much, sir. Thank you. Good night, sir.

[01:03:55]>> Yeah. Good night, everyone. Um, stop stop.

[01:04:07]Stop.