Which of the Following Is True About Estimating a fiRm's

question 83

Multiple Choice

Which of the following is true about estimating a firm's cost of equity capital?

• A) We have no model that will provide reasonable estimates.
• B) It is relatively easy to calculate the firm's cost of debt and then back out the cost of equity.
• C) The cost of equity is equal to the weighted average cost of capital.
• D) The cost of equity depends on the total risk of the firm's equity.
• E) There is no way to directly observe the return required by the firm's equity investors.

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Definitions:

Treasury

Refers to the department within a government or organization that is responsible for managing the institution's revenue, spending, and debt.

IFRS

International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International Accounting Standards Board (IASB) that aim to bring consistency to accounting language, practices, and statements globally.

Reserves

Funds or assets set aside to cover future expenses, losses, or liabilities.

Asset Revaluations

The process of adjusting the book value of a company's assets to reflect their current market values.