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:

Prospecting

The search for potential customers.

Target Market

The group of customers toward which an organization has decided to direct its marketing efforts.

Authority

The power or right to give orders, make decisions, and enforce obedience.

Customer-Oriented

An approach or strategy in business that focuses on creating a positive experience for the customer, prioritizing their needs and satisfaction.