The text identifies three methods for estimating the cost of common stock from reinvested earnings (not newly issued stock): the CAPM method, the DCF method, and the bond-yield-plus-risk-premium method.However, only the CAPM method always provides an accurate and reliable estimate.

Question

Quizplus · Accepted Answer

None of the methods always provides accurate and reliable estimates.With the CAPM, we don't know the beta that investors are using, we are not totally sure of what rRf to use, and we don't know if the CAPM is truly correctrue.

The Text Identifies Three Methods for Estimating the Cost of Common