Which of the Following Statements Is Correct

question 85

Multiple Choice

Which of the following statements is correct?

• A) Beta measures market risk, but if a firm's shareholders are not well diversified, beta may not accurately measure the firm's total risk.
• B) If the calculated beta underestimates the firm's true investment risk, then the CAPM method will overestimate rs.
• C) The discounted cash flow method of estimating the cost of equity can't be used unless the growth component, g, is constant during the analysis period.
• D) An advantage shared by both the DCF and CAPM methods of estimating the cost of equity capital, is that they yield precise estimates and require little or no judgment.
• E) None of the above is a correct statement.