Which of the Following Statements Is CORRECT

question 83

Multiple Choice

Which of the following statements is CORRECT?

• A) If the calculated beta underestimates the firm's true investment risk⎯i.e., if the forward-looking beta that investors think exists exceeds the historical beta⎯then the CAPM method based on the historical beta will produce an estimate of r_s and thus WACC that is too high.
• B) Beta measures market risk, which is, theoretically, the most relevant risk measure for a publicly-owned firm that seeks to maximize its intrinsic value.This is true even if not all of the firm's stockholders are well diversified.
• C) An advantage shared by both the dividend growth model and CAPM methods when they are used to estimate the cost of equity is that they are both "objective" as opposed to "subjective," hence little or no judgment is required.
• D) The specific risk premium used in the CAPM is the same as the risk premium used in the bond-yield-plus-risk-premium approach.
• E) The discounted cash flow method of estimating the cost of equity cannot be used unless the growth rate, g, is expected to be constant forever.

Understand the impact of electronic transactions on traditional concepts of written contracts.

Recognize the enforceability of oral agreements under specific conditions.

Understand the significance of industry standards and practices in interpreting or completing contracts.

Differentiate between the requirements and exceptions of the statute of frauds in the U.S. and England.

---

Definitions:

Genetic

Pertaining to genes and heredity, influencing the development and functioning of organisms and their transmission of traits to offspring.

Learned

Acquired knowledge or skills through experience, study, or being taught, which can influence behavior and cognition.

Incentive Salience

The attribute of a stimulus that makes it stand out as particularly attractive or desirable, often influencing motivation and behavior.

Associative Learning

A learning process by which a subject comes to associate stimuli or behaviors with certain outcomes.