When Calculating a Firm's Cost of Equity Using CAPM, It

question 78

Multiple Choice

When calculating a firm's cost of equity using CAPM, it is generally recommended that_________be used as the risk-free rate.

• A) Government of Canada long-term bonds
• B) the prime lending rate offered by banks
• C) Government of Canada T-bills
• D) long-term corporate bonds

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Definitions:

EPS

EPS stands for Earnings Per Share, a financial ratio that measures the amount of a company's profit that is allocated to each individual share of its common stock.

Intrinsic Value

The actual, fundamental value of an asset, based on underlying perceptions of its true value including all aspects of the business.

ROE

ROE, or Return on Equity, measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.

Required Return

The minimum expected return an investor demands for an investment, considering its risk level.