Provide an Appropriate Response

question 49

Multiple Choice

Provide an appropriate response.
-Use the graph to find the slope, x-intercept and y-intercept of the line.

• A) slope = -1
• B) slope = 1 x-intercept = (7, 0) x-intercept = (7, 0) Y-intercept = (0, -7) y-intercept = (0, -7)
• C) slope = 1
• D) slope = - 1 x-intercept = (0, 7) x-intercept = (-7, 0) Y-intercept = (-7, 0) y-intercept = (0, 7)

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Definitions:

Dividend Growth Model

A valuation method used to estimate the price of a company's stock by using predicted dividends and discounting them back to present value.

SML Approach

Refers to the Security Market Line approach, a graphical representation in the Capital Asset Pricing Model (CAPM) that depicts the relationship between risk and expected return for all securities.

Flotation Costs

Expenses incurred by a company in issuing new securities, including legal, administrative, and underwriting fees.

Computed NPV

The calculated Net Present Value based on a specific discount rate and series of cash flows.