Compare and Contrast the Subjective and Pure Play Approaches to Estimating

question 96

Essay

Compare and contrast the subjective and pure play approaches to estimating the cost of capital. Under what conditions is each appropriate? What are the dangers of computing the cost of capital incorrectly?

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Definitions:

Total Dollar Return

The overall financial benefit received from an investment, considering both capital gains and income such as dividends or interest.

Shares

Units of ownership interest in a corporation or financial asset that provides for an equal distribution in any profits, if any are declared, in the form of dividends.

Large Company Stocks

Shares issued by corporations with a large market capitalization, often considered less risky investments.

Increased Value

The appreciation or rise in the worth of an asset or investment over a period of time.