Which of the Following Statements Is Correct

question 55

Multiple Choice

Which of the following statements is correct?

• A) Beta measures market risk,but if a firm's stockholders are not well diversified,beta may not accurately measure the firm's total risk.
• B) If the calculated beta underestimates the firm's true investment risk,then the CAPM method will overestimate r_s.
• C) The discounted cash flow method of estimating the cost of equity can't be used unless the growth component,g,is constant during the analysis period.
• D) An advantage shared by both the DCF and CAPM methods of estimating the cost of equity capital,is that they yield precise estimates and require little or no judgment.
• E) None of the above is a correct statement.

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