For Firms Whose Market Value Is Less Than $50 Million

question 27

True/False

For firms whose market value is less than $50 million, the adjustment to the CAPM in estimating the cost of equity can be as large as 2 percentage points.

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Definitions:

Vertical Axis

In a graph or chart, the vertical line or scale along which numerical data is plotted or measured, usually representing quantities.

Straight Line

A direct, shortest path between two points in a plane, often used in mathematics to describe linear functions.

Horizontal Axis

In a graph or chart, the x-axis, representing the independent variable or the base line for measuring.

Vertical Axis

In a graph or chart, the y-axis which typically represents the dependent variable or outcome in relation to the independent variable on the horizontal axis.