I have couple of questions in regards to the extended capm and build up cost of equity.
When solving for the extended CAPM method, we add the risk premiums associated to the size and to the company. How come in none of the problems they include the beta sensitivity for each of factor? Or is it just assumed to be 1? and why?
In the build up cost of equity method, in addition to the size, and company specific factor, we also add the industry factor. But why wasnt the industry factor added to the extended CAPM? Here the beta is assumed to be 1 and again I dont get why?
Is there difference between two formulas just the industry risk factor?