The Capital Asset Pricing Model (CAPM)states That the Expected Return

question 52

Multiple Choice

The Capital Asset Pricing Model (CAPM) states that the expected return on an asset depends upon its level of:

• A)systematic risk
• B)unsystematic risk
• C)beta
• D)two of the above
• E)none of the above

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Definitions:

Incremental Value

The additional value generated from a particular decision, investment, or action over its alternative.

Acquiring Firm

A company that purchases or takes control of another company through a merger, acquisition, or takeover.

Target Firm

A company that is the subject of a takeover attempt or an acquisition by another company.

NPV

A method used in capital budgeting to assess the profitability of an investment or project, calculating the difference between the present value of cash inflows and outflows.