When Estimating the Cost of Equity by Use of the DCF

question 66

True/False

When estimating the cost of equity by use of the DCF method, the single biggest potential problem is to determine the growth rate that investors use when they estimate a stock's expected future rate of return. This problem leaves us unsure of the true value of rs.

---

Definitions:

Percentile

Percentile is a statistical measure indicating the value below which a given percentage of observations in a group of observations fall, often used in growth charts and test scores to compare an individual’s performance to a population.

Newborn

A baby from birth to about two months of age, during the initial phase of life outside the womb.

Pediatrician

A medical doctor specializing in the physical, behavioral, and mental care of children from birth until adolescence.

Slow-wave Sleep

A deep sleep phase characterized by slow brain waves, important for physical restoration and memory consolidation.