Which of the following is a situation in which you would want to use the CAPM approach for estimating the component cost of equity?
A) when you are able to estimate the market risk premium with certainty
B) when you are able to estimate the risk-free rate with certainty
C) when you are able to estimate the firm's beta with certainty
D) when the firm pays a constant dividend

Question

Quizplus · Accepted Answer

The CAPM approach is most useful when you can estimate the firm's beta with certainty, as beta measures the firm's risk relative to the market, which is a key component in the CAPM formula.

Which of the Following Is a Situation in Which You