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:

Psychotic Symptoms

Manifestations of severe mental disorders that involve a loss of contact with reality, such as hallucinations or delusions.

Hallucinations

Perceptions in a conscious and awake state in the absence of external stimuli which have qualities of real perception.

Delusions

Firmly held erroneous beliefs that are not amenable to change in light of conflicting evidence, often observed in psychiatric conditions.

Hyperactivity

An elevated level of activity that may be characterized by restlessness, an inability to stay focused, or excessive physical movements.