The cost of common stock equity may be estimated by using the ________.
A) yield curve
B) capital asset pricing model
C) break-even analysis
D) DuPont analysis

Question

Quizplus · Accepted Answer

The capital asset pricing model (CAPM) is commonly used to estimate the cost of common stock equity. This model takes into account the risk-free rate of return, the expected market rate of return, and the stock's beta, which measures its volatility compared to the overall market. The yield curve is used to predict interest rates, break-even analysis is a technique for analyzing costs and revenues, and DuPont analysis measures a company's return on equity by analyzing its profitability, asset management, and financial leverage.

The Cost of Common Stock Equity May Be Estimated by Using