The cost of common stock equity may be estimated by using the
A) yield curve.
B) capital asset pricing model.
C) internal rate of return.
D) DuPont analysis.

Question

Quizplus · Accepted Answer

The capital asset pricing model (CAPM) is a commonly used method for estimating the cost of common stock equity. It takes into account the risk-free rate, market risk premium, and the beta of the company's stock to determine the expected return on the investment. This expected return can then be used as an estimate for the cost of the common equity.

The Cost of Common Stock Equity May Be Estimated by Using