Which of the Following Gives the Calculation of the Capitalization

question 9

Multiple Choice

Which of the following gives the calculation of the capitalization rate?

• A) the equity risk premium plus the specific company risk premium
• B) the required rate of return minus the risk free rate
• C) the dividend payout rate plus the long-term sustainable growth rate
• D) the discount rate minus the expected long-term sustainable growth rate

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Definitions:

Consumption Function

A representation in economics indicating the relationship between total consumer expenditures and household income levels.

Interest Rate

The cost of borrowing money or the return on savings, expressed as a percentage, influencing economic activity by affecting spending and investment decisions.

Consumption Function

An economic formula representing the relationship between total consumption and gross national income, indicating how changes in income affect spending.

Saving

The portion of income not spent on current expenditures or consumption, often put aside for future use or investment.