Which of the Following Statements Is Correct

question 79

Multiple Choice

Which of the following statements is correct?

• A)The discounted cash flow method of estimating the cost of equity cannot be used unless the growth rate, g, is expected to be constant forever.
• B)If the calculated beta underestimates the firm's true investment risk, i.e., if the forward-looking beta that investors think exists exceeds the historical beta, then the CAPM method based on the historical beta will produce an estimate of r_s and thus a WACC that is too high.
• C)Beta measures market risk, which is the most relevant risk measure for a publicly owned firm that seeks to maximize its intrinsic value. This is true even if not all of the firm's stockholders are well diversified.
• D)The specific risk premium used in the CAPM is the same as the risk premium used in the bond-yield-plus-risk-premium approach.

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Definitions:

Personal Selling

A promotional strategy involving direct interaction between a sales representative and a prospective buyer to close a sale.

Basic

The term "basic" refers to something that is fundamental, simple, or at the foundational level, often indicating the essential starting point of a concept or process.

Promotion

A marketing strategy used to increase awareness, interest, and sales of a product or service.

Guerrilla Marketing

Innovative, low-cost marketing effort designed to get consumers’ attention in unusual ways.