Because They Can Be Potentially So Lucrative to Sellers, Earn-Outs

question 133

True/False

Because they can be potentially so lucrative to sellers, earn-outs are sometimes used to close the gap between what the seller wants and what the buyer might be willing to pay.

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Definitions:

Conventional CAPM

The Capital Asset Pricing Model, a financial model that describes the relationship between systematic risk and expected return for assets, typically used for pricing risky securities.

Human Capital

The economic value of an individual's skill set and knowledge, which can contribute to their productivity and earnings.

Conditional CAPM

An extension of the Capital Asset Pricing Model that accounts for varying conditions over time or different market environments.

Empirical Returns

Returns that are calculated based on historical data, reflecting the actual gains or losses realized over a specific period.