The Recommended Model to Estimate the Cost of Common Equity

question 9

Multiple Choice

The recommended model to estimate the cost of common equity for a firm is

• A) the one-stage constant growth dividend model.
• B) the multistage -growth dividend model.
• C) the capital asset pricing model(CAPM).
• D) None of the above

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Definitions:

Contract

A legally binding agreement between two or more parties that defines and governs the rights and duties of those parties.

Put Option

An agreement in finance that permits the owner to sell a predetermined quantity of a basic asset at an agreed price during an established timeframe, without being compelled to do so.

Protective Put

An options strategy where an investor purchases a put option for an existing stock position to limit potential losses.

Listed Put Option

A put option that is traded on an official exchange, giving the holder the right but not the obligation to sell a specific asset at a set price before the option expires.