Use of the Capital Asset Pricing Model (CAPM) in Measuring

question 6

True/False

Use of the Capital Asset Pricing Model (CAPM) in measuring the cost of common stock equity differs from the constant growth valuation model in that it directly considers the firm's risk as reflected by beta.

---

Definitions:

Equity Dilution

The decrease in existing shareholders' ownership percentages of a company as a result of the company issuing more shares.

Entrepreneurial Finance

The study and practice of financial management and funding strategies specific to entrepreneurship and startups.

Central Issues

The core or primary concerns, problems, or topics within a discussion context.

Short-Term Debt

Financial obligations that are due for repayment within a short period, typically less than one year.