The cost of ordinary equity may be estimated by using the
A) discounted payback method.
B) capital asset pricing model.
C) internal rate of return.
D) yield curve.

Question

Quizplus · Accepted Answer

The capital asset pricing model (CAPM) is a widely used method for estimating the cost of equity. It takes into account the risk-free rate, market risk premium, and a company's beta (systematic risk) to calculate the required return investors need for holding the company's stock. The other options listed are not commonly used for estimating the cost of equity.

The Cost of Ordinary Equity May Be Estimated by Using