When Estimating the Cost of Equity by Use of the Bond-Yield-Plus-Risk-Premium

question 77

True/False

When estimating the cost of equity by use of the bond-yield-plus-risk-premium method, we can generally get a good idea of the interest rate on new long-term debt, but we cannot be sure that the risk premium we add is appropriate. This problem leaves us unsure of the true value of rs.

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Definitions:

Ingestion

The act of taking substances, typically food or medication, into the body through the mouth for digestion.

Chemical Burn

Tissue damage caused by exposure to a corrosive substance, which can affect the skin and mucous membranes.

Acids

Chemical substances that release hydrogen ions when dissolved in water, exhibiting a sour taste and capable of turning blue litmus paper red.

Wound

An injury to living tissue, especially an injury involving a cut or break in the skin.