Which of the Following Statements Is Correct

question 35

Multiple Choice

Which of the following statements is correct?

• A)Under normal conditions, the CAPM approach to estimating a firm's cost of retained earnings gives a better estimate than the DCF approach.
• B)The CAPM approach is typically used to estimate a firm's flotation cost adjustment factor, and this factor is added to the DCF cost estimate.
• C)The risk premium used in the bond-yield-plus-risk-premium method is the same as the one used in the CAPM method.
• D)In practice (as opposed to theory), the DCF method and the CAPM method usually produce exactly the same estimate for r.
• E)The above statements are all false.

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Definitions:

Simulation Steps

Sequential actions or procedures used in a simulation process to represent the operation of a real-world process or system over time.

Time Compression

Strategies or processes aimed at reducing the time taken to complete tasks or deliver goods, thereby increasing efficiency and competitive advantage.

Computer Simulation

The use of software to create a virtual model of a real-world system or process to study its behavior under various conditions.

Random Number Intervals

Ranges generated through a stochastic process, used in simulations and statistical sampling to represent uncertain outcomes.