Which of the Following Statements Is Correct

question 35

Multiple Choice

Which of the following statements is correct?

• A)Under normal conditions, the CAPM approach to estimating a firm's cost of retained earnings gives a better estimate than the DCF approach.
• B)The CAPM approach is typically used to estimate a firm's flotation cost adjustment factor, and this factor is added to the DCF cost estimate.
• C)The risk premium used in the bond-yield-plus-risk-premium method is the same as the one used in the CAPM method.
• D)In practice (as opposed to theory), the DCF method and the CAPM method usually produce exactly the same estimate for r.
• E)The above statements are all false.

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