Which of the Following Methods of Estimating the Cost of Common

question 80

Multiple Choice

Which of the following methods of estimating the cost of common equity for a firm treats risk explicitly?

• A) DCF method.
• B) CAPM method.
• C) Composite method.
• D) Bond-yield-plus-risk-premium method.
• E) Answers b and d are both correct.

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Definitions:

Governmental Paperwork

Documents required by government agencies that businesses need to fill out and submit for regulatory, tax, or legal purposes.

Asset-Based

Asset-based refers to a type of business financing or lending that uses the company's assets as collateral to secure the loan.

Comparable Businesses

Companies operating in the same or similar industry, used as benchmarks to assess relative performance, valuation, and strategic positioning.

Income

Money received, especially on a regular basis, for work or through investments.