It’s testing below LOS. Is 2015 version still there? Can’t find it…
LOS: 2013-III-5-17-a-c
17. “Allocating Shareholder Capital to Pension Plans”
The candidate should be able to:
b) explain how the weighted average cost of capital for a corporation can be adjusted to incorporate pension risk and discuss the potential consequences of not making this adjustment;
c) explain, in an expanded balance sheet framework, the effects of different pension asset allocations on total asset betas, the equity capital needed to maintain equity beta at a desired level, and the debt-to-equity ratio.
LOS: 2013-III-5-17-a-c
17. “Allocating Shareholder Capital to Pension Plans”
The candidate should be able to:
b) explain how the weighted average cost of capital for a corporation can be adjusted to incorporate pension risk and discuss the potential consequences of not making this adjustment;
c) explain, in an expanded balance sheet framework, the effects of different pension asset allocations on total asset betas, the equity capital needed to maintain equity beta at a desired level, and the debt-to-equity ratio.