The Correct Treasury Rate to Use in Calculating the Cost

question 24

True/False

The correct Treasury rate to use in calculating the cost of equity (when using the CAPM) for a company is a short-term rate.

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Definitions:

Straight-Line Basis

A method of calculating depreciation or amortization by evenly spreading the cost of an asset over its useful life.

Salvage Value

The expected sale value of an asset upon reaching the end of its serviceable life.

Units-Of-Activity Method

Depreciation method in which useful life is expressed in terms of the total units of production or use expected from an asset.

Depreciation Expense

The allocation of a tangible asset's cost over its useful life to account for declines in value over time.