Empirical Studies Find That Emerging Market Returns Tend to Have

question 21

Multiple Choice

Empirical studies find that emerging market returns tend to have ??______.

• A) lower volatilities than developed market returns
• B) lower correlations with the world market portfolio than developed market returns
• C) less political risk than developed market returns
• D) More than one of the above
• E) None of the above

Apply the dividend growth model to estimate the cost of common equity.

Differentiate between book value and market value and understand the relevance of each in calculating WACC.

Analyze capital structure using market values to calculate the firm's WACC.

Understand the concept of marginal cost of capital (MCC) and its implications for capital budgeting.

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Definitions:

Wages

Payments made to workers for their labor, usually calculated on an hourly, daily, or piecework basis.

Salaries

Salaries refer to the regular payments made by employers to employees, typically on a monthly or bi-weekly basis, in exchange for their labor or services.

Shutting Down

A short-term decision by a firm to cease production due to market conditions, typically when revenue does not cover variable costs.

Fixed Costs

These are business expenses that remain constant regardless of the level of goods or services produced, such as rent, salaries, and insurance premiums.