QUESTION 11Which of the following is not a problem of using the CAPM in the investment appraisal process?O A. The proxy company's equity beta includes financial riskO B. Proxy companies often undertake a portfolio of business activitiesOC. The CAPM is a single-period model, but investment appraisal is multi-period.O D. The CAPM model relies on a number of assumptionsO E. Proxy company information is not publicly available QUESTION 12A company has the choice of either buying a machine outright for £200,000 which it will scrap in three years time for nothing,but which will attract a 100% first year capital allowance: or of leasing the machine for three years for an annual payment of£60,000 pyable in advance at the start of each year. The company receives tax benefits and the first tax benefit, whetherleasing or borrowing, occurs in year 1. The company can borrow at a pre-tax rate of 10% and corporation tax stands at 30%.Round up your answer to the néarest £100. Which óf the following is true?O A. Leasing is beneficial by £78,800O B. Leasing is beneficial by £22,700OC. Leasing is beneficial by £17,500OD. Buying is beneficial by £22,700O E. Buying is beneficial by £24,600

Option A is correct. Proxy company's beta includes finacial risk, this statement is not a problem…

QUESTION 11 Which of the following is not a problem of using the CAPM in the investment appraisal process? O A. The proxy company's equity beta includes financial risk O B. Proxy companies often undertake a portfolio of business activities OC. The CAPM is a single-period model, but investment appraisal is multi-period. O D. The CAPM model relies on a number of assumptions O E. Proxy company information is not publicly available

QUESTION 11 Which of the following is not a problem of using the CAPM in the investment appraisal process? O A. The proxy company's equity beta includes financial risk O B. Proxy companies often undertake a portfolio of business activities OC. The CAPM is a single-period model, but investment appraisal is multi-period. O D. The CAPM model relies on a number of assumptions O E. Proxy company information is not publicly available

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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