Comment on the following statement: CAPM method is superior to WACC method when choosing discount rates for capital budgeting.

I would disagree with the statement that the CAPM method is superior to the WACC method when choosing discount rates for capital budgeting. The CAPM method only considers the systematic risk of an investment, which is measured as the beta coefficient of the asset. On the other hand, the WACC method takes into account the cost of both debt and equity, which reflects the overall risk of the company.

The WACC method is more suitable for capital budgeting decisions because it considers the entire cost of capital, which includes the cost of debt and equity financing, and is therefore a more comprehensive measure of risk. Moreover, the WACC method is more flexible as it can be adjusted to reflect changes in a company's capital structure.

In conclusion, while the CAPM method is useful for estimating the cost of equity, the WACC method provides a more comprehensive measure of the cost of capital and is therefore a better choice for capital budgeting decisions.