A Major Finding by Heaton and Lucas (2000) Is That

question 35

Multiple Choice

A major finding by Heaton and Lucas (2000) is that

• A) the market rate of return does not help explain the rate of return of individual securities, and CAPM must be rejected.
• B) the market rate of return does explain the rate of return of individual securities.
• C) the change in proprietary wealth helps explain the rate of return of individual securities.
• D) the market rate of return does not help explain the rate of return of individual securities, and CAPM must be rejected, but the change in proprietary wealth helps explain the rate of return of individual securities.
• E) None of the options are correct.

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Definitions:

Net Present Value

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

Additional Working Capital

Refers to the extra funds a business requires for its day-to-day operations, beyond its current operational needs.

Salvage Value

The anticipated end-of-service-life residual value of an asset.

Discount Rate

The interest rate used in discounted cash flow analysis to determine the present value of future cash flows, reflecting the investment's risk and the time value of money.