Which of the Following Statements Is Most Correct

question 33

Multiple Choice

Which of the following statements is most correct?

• A) Although some methods of estimating the cost of equity capital encounter severe difficulties, the CAPM is a simple and reliable model that provides great accuracy and consistency in estimating the cost of equity capital.
• B) The DCF model is preferred over other models to estimate the cost of equity because of the ease with which a firm's growth rate is obtained.
• C) The bond-yield-plus-risk-premium approach to estimating the cost of equity is not always accurate but its advantages are that it is a standardized and objective model.
• D) Depreciation-generated funds are an additional source of capital and, in fact, represent the largest single source of funds for some firms.
• E) None of the statements above is correct.

---

Definitions:

Structured

Organized and systematic in approach, often following a specific methodology or format to ensure consistency and effectiveness.

Research Techniques

A variety of methods and strategies used to gather data and information for the purpose of making business decisions.

BCG Growth-Market Share Matrix

A strategic planning tool that uses two dimensions: market growth rate and market share to categorize the business portfolio into four types: Stars, Question Marks, Cash Cows, and Dogs.

Strategic Business Units

Strategic business units are distinct divisions within a larger corporation, each focusing on a specific market segment or product line, and possessing its own strategy, resources, and objectives.