What are the sources of uncertainties in the valuation of common equities?

Question

Quizplus · Accepted Answer

The sources of uncertainties in the valuation of common equities include cash flow size, timing, and discount rate. Cash flow size and timing will determine the future cash flows that the equity will generate, while the discount rate represents the opportunity cost of investing in the equity as opposed to other investments with similar risks. These factors may also be affected by external factors such as changes in the market or economic conditions. Therefore, the best answer is C, which includes all three sources of uncertainties. Option A (discount rate only) and D (cash flow size, timing, and risk-free rate) are not comprehensive enough to cover all the sources of uncertainties.

What Are the Sources of Uncertainties in the Valuation of Common