The Difficulty in Using the CAPM for Determining the Cost

question 78

Multiple Choice

The difficulty in using the CAPM for determining the cost of equity lies in:

• A) the estimation of the firm's beta.
• B) the estimation of the risk-free rate.
• C) the estimation of the return on the market.
• D) All of these choices are correct.

Understand the concept and importance of strategic planning in businesses.

Recognize the role of environmental analysis in strategic planning.

Comprehend the ethical considerations in management and the impact of ethical leadership.

Identify opportunities arising from sociocultural trends for small businesses.

---

Definitions:

Commercial Impracticability

A legal principle that excuses a party from performing under a contract when unforeseen events make fulfillment unreasonably difficult or expensive.

Groundwater Contaminated

Water beneath the earth's surface that has been adversely affected by pollutants, making it unsafe for human consumption or use.

Supervening Event

An unforeseen event that occurs after the parties have entered into a contract and significantly changes the circumstances.

Proprietary Information

Confidential business information that provides a company with a competitive edge, such as trade secrets, processes, or formulas.