Which of the following is true about estimating a firm's cost of equity capital?
A) We have no model that will provide reasonable estimates.
B) It is relatively easy to calculate the firm's cost of debt and then back out the cost of equity.
C) The cost of equity is equal to the weighted average cost of capital.
D) The cost of equity depends on the total risk of the firm's equity.
E) There is no way to directly observe the return required by the firm's equity investors.
Correct Answer:
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