The Cost of Equity for a Firm

question 13

Multiple Choice

The cost of equity for a firm:

• A)tends to remain static for firms with increasing levels of risk.
• B)increases as the unsystematic risk of the firm increases.
• C)ignores the firm's risks when that cost is based on the dividend growth model.
• D)equals the risk-free rate plus the market risk premium.
• E)equals the firm's pretax weighted average cost of capital.

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Definitions:

Ciliates

A group of protozoans characterized by the presence of hair-like structures called cilia used for movement and feeding.

Actinopods

A group of protozoa characterized by long, slender pseudopodia used for catching food and locomotion.

Cytoplasmic Projections

Extensions of the cell's cytoplasm, such as cilia and flagella, that can move the cell or move fluids past the cell.

Axopods

Long, slender, and sometimes retractable projections of some eukaryotic cells involved in locomotion or feeding.