Which of the Following Statements Is Correct

question 97

Multiple Choice

Which of the following statements is correct?

• A) Although some methods of estimating the cost of capital encounter severe difficulties,the CAPM is a simple and reliable model that provides great accuracy and consistency in estimating the cost of capital.
• B) The DCF model is preferred over other models to estimate the cost of equity because of the ease with which a firm's growth rate is obtained.
• C) The bond-yield-plus-risk-premium approach to estimating the cost of equity is not always accurate but its advantages are that it is a standardized and objective model.
• D) The tax savings associated with depreciation are an additional source of capital and,in fact,represent the largest single source of funds for some firms.
• E) None of the above is a correct statement.

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Definitions:

Population Mean

The average value of all individuals in a population.

Margin of Error

A measure of the accuracy of a poll or survey, reflecting the extent to which the results could differ from the true population value.

Point Estimate

A single value or statistic that serves as the best guess or estimate of a population parameter.

Population Mean

Population mean is the average value of all elements in a complete set or population.