In Calculating the Cost of Common Stock Equity

question 43

Multiple Choice

In calculating the cost of common stock equity

• A) the use of the capital asset pricing model (CAPM) is often preferred, because the data required are more readily available.
• B) the use of the CAPM is preferred, because it more directly calculates risk.
• C) the use of the constant growth valuation model is often preferred, because the data required are more readily available.
• D) the use of the constant growth valuation model is often preferred, because it has a stronger theoretical foundation.

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Definitions:

Reaction Range

The concept in genetics that individual genotype sets limits on the range of possible phenotypes in response to different environments.

Inherited Traits

Characteristics or attributes that are passed from parents to their offspring through genes.

Unique Environments

Specific settings or conditions that are distinct in characteristics and can influence individuals in diverse ways.

Sonogram

A procedure for using ultrasonic sound waves to create a picture of an embryo or fetus.