Many corporate finance professionals favor the CAPM for determining the cost of equity. Which of the following is a reason for this preference?
A) The data is less expensive.
B) The variables in the model that apply to public corporations are readily available from public sources.
C) Because the CAPM gives better treatment to flotation costs.
D) The CAPM uses data from the firm's financial statements.
Answer: B
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Donnelley Products sells 2,500 kayaks per year at a sales price of $470 per unit
Donnelley sells in a highly competitive market and uses target pricing. The company has $1,000,000 of assets, and the shareholders wish to make a profit of 16% on assets. Variable cost is $180 per unit and cannot be reduced. Assume all products produced are sold. What are the target fixed costs? A) $1,175,000 B) $1,015,000 C) $160,000 D) $565,000
Unlike manufacturing companies, service companies use an allocation base for allocating both direct and indirect costs
Indicate whether the statement is true or false