Which One of the Following Statements Related to the SML

question 38

Multiple Choice

Which one of the following statements related to the SML approach to equity valuation is correct? Assume the firm uses debt in its capital structure.

• A)This model considers a firm's rate of growth.
• B)The model applies only to non-dividend paying firms.
• C)The model is dependent upon a reliable estimate of the market risk premium.
• D)The model generally produces the same cost of equity as the dividend growth model.
• E)This approach generally produces a cost of equity that equals the firm's overall cost of capital.