Capital Budgeting Approaches

The three capital budgeting approaches (flow to equity - FTE, weighted average cost of capital - WACC, adjusted present value - APV) use projected financial statements. How can these three methods are used when some of the variables are known and some are unknown and what are the limitations of the methods?Flow to equity methodFlow to equity method is a method which determines how much cash can be paid to the equity shareholders of the company after all expenses, reinvestment and debt repayment. It is a direct method of equity valuation and analyzes the intrinsic value of shares and from equity shareholder point of view. It only uses cost of equity as the discounted rate to discount the flows and arriving at the value generated from equity shareholder view point. The Cost of Equity, for the firm under this method determined through the Capital Asset Pricing Model (CAPM) defined as:Rf stands for risk free rate i.e. the return on government security. Rm is the market rate of return (Rm-Rf) denotes the market risk premium which market offers over and above risk free rateB stands for Beta