Which of the Following Statements Is Most Correct

question 20

Multiple Choice

Which of the following statements is most correct?

• A) The CAPM approach to estimating a firm's cost of common stock never gives a better estimate than the DCF approach.
• B) The CAPM approach is typically used to estimate a firm's cost of preferred stock.
• C) The risk premium used in the bond-yield-plus-risk-premium method is the same as the one used in the CAPM method.
• D) In practice (as opposed to in theory), the DCF method and the CAPM method usually produce exactly the same estimate for rs.
• E) The statements above are all false.

Utilize the Poisson distribution for calculating probabilities of given events.

Calculate and interpret the mean of a sampling distribution.

Apply principles of sample size determination to control sampling error.

Understand the difference between bias and variability in the context of sample surveys and experiments.

---

Definitions:

Labor Quantity Variance

The difference between the actual hours worked and the standard hours allowed for the work performed, multiplied by the standard hourly wage rate.

Produced

The completed output of goods or services as a result of manufacturing or production processes.

Materials Price Variance

The difference between the actual cost of materials used in production and the expected (or standard) cost of those materials.

Direct Materials Quantity Variance

The variance between the real amount of materials consumed in production and the anticipated standard amount, multiplied by the cost per unit according to standards.