Text Identifies Three Methods for Estimating the Cost of Common

question 88

True/False

text identifies three methods for estimating the cost of common stock from retained earnings: the CAPM method, the DCF method, and the bond-yield-plus-risk-premium method.Since we cannot be sure that the estimate obtained with any of these methods is correct, it is often appropriate to use all three methods, then consider all three estimates, and end up using a judgmental estimate when calculating the WACC.

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Definitions:

Monomorphic

Characterized by having a single shape or form, often used in the context of genes or polymorphism.

Reactance

A psychological response wherein individuals feel the need to regain freedom or control when they perceive it as being taken away.

Independence

The state or quality of being self-reliant and free from outside control, capable of making decisions and acting on one's own.

Anticonformity

Behavior that opposes or rejects social norms and standards, deviating from group expectations consciously.