Which of the following statements is correct?
A) Beta measures market risk, but if a firm's stockholders are not well diversified, beta may not accurately measure the firm's total risk.
B) If the calculated beta underestimates the firm's true investment risk, then the CAPM method will overestimate rs.
C) The discounted cash flow method of estimating the cost of equity can't be used unless the growth component, g, is constant during the analysis period.
D) An advantage shared by both the DCF and CAPM methods of estimating the cost of equity capital, is that they yield precise estimates and require little or no judgment.
E) None of the above is a correct statement.
Correct Answer:
Verified
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