All of the Following Methods Can Be Used to Estimate

question 7

Multiple Choice

All of the following methods can be used to estimate the cost of equity except:

• A)Unlike debt and preferred stock,cash flows from common equity are not fixed or known beforehand and their risk is harder to evaluate.
• B)Firms have two sources of common equity,retained earnings and new stock issues,and thus two costs of common equity.
• C)From the shareholders' perspective,the opportunity cost of retained earnings is the return the shareholders could earn by investing the funds in assets whose risk is similar to that of the firm.
• D)If the firm cannot invest its retained earnings to achieve a sufficient risk-adjusted return,shareholders would be better off receiving 100 percent of its net income as dividends.
• E)All of the above statements are correct.

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Definitions:

Libertarians

Individuals who advocate for minimal government intervention in personal and economic affairs, emphasizing individual liberty and free markets.

Individual Rights

The basic entitlements and freedoms that belong to every person, typically upheld by law and societal norms, including rights to privacy, speech, and equal treatment.

Poverty Rate

The percentage of the population whose income falls below the threshold deemed necessary to cover basic living costs, determining the level of poverty.

Poverty Line

A threshold level of income set by governments or organizations, below which individuals or families are considered to be living in poverty.