Quiz Ch 10 – T/F Estimating Cost of Common Stock from Retained Earnings

Fundamentals of Financial Management, Concise

Brigham and Houston

09th Edition

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True or false: The passage introduces three approaches to estimating the cost of common stock from retained earnings: the CAPM method, the DCF method, and the bond-yield-plus-risk-premium method. As the accuracy of any of these methods cannot be guaranteed, it is often suitable to apply all three methods, assess their resulting estimates, and ultimately rely on a judgment-based estimate when computing the WACC.

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