Quiz Ch 10 – T/F Challenges in Estimating Cost of Equity with CAPM

Fundamentals of Financial Management, Concise

Brigham and Houston

09th Edition

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True or false: Estimating the cost of equity through the CAPM method presents three potential issues: (1) choosing between long-term or short-term rates for rRF, (2) determining whether the historical beta matches investors' assessment of the stock, and (3) defining the measurement of the market risk premium, RPM. These challenges result in uncertainty about the actual value of rs.

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