Which of the Following Statements Is True of the Capital

question 2

Multiple Choice

Which of the following statements is true of the capital asset pricing model (CAPM) ?

• A) The capital asset pricing model (CAPM) approach to estimating a firm's cost of retained earnings gives a better estimate than the discounted cash flow (DCF) approach.
• B) The capital asset pricing model (CAPM) approach is typically used to estimate a firm's flotation cost adjustment factor, and this factor is added to the discounted cash flow (DCF) cost estimate.
• C) The beta coefficient used in the capital asset pricing model (CAPM) approach is the same as the growth rate used in the discounted cash flow (DCF) method.
• D) The capital asset pricing model (CAPM) approach and the discounted cash flow (DCF) approach always result in exactly the same estimate for r.
• E) The capital asset pricing model (CAPM) approach assumes investors are well diversified and the discounted cash flow (DCF) approach assumes constant growth rate.

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Relational Architecture

The design and structure of relationships within an organization, including how communication and interaction are facilitated.

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