When Estimating the Cost of Equity by Use of the Bond-Yield-Plus-Risk-Premium

question 61

True/False

When estimating the cost of equity by use of the bond-yield-plus-risk-premium method, we can generally get a good idea of the interest rate on new long-term debt, but we cannot be sure that the risk premium we add is appropriate.This problem leaves us unsure of the true value of r_s.

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Definitions:

Reward Motivation

The drive to engage in activities that are expected to yield positive outcomes or rewards.

Timeliness

The quality of completing or delivering something within the expected or agreed time.

Durability

The capacity of a material or object to resist degradation, pressure, or harm.

Equity

The principle of fairness in interactions, often focusing on distributing resources or opportunities equally among all individuals involved.