The Capital Asset Pricing Model (CAPM) is primarily used to: a) Estimate an investment's future value b) Determine a stock's intrinsic value c) Calculate the required rate of return on an investment d) Calculate the dividend payment of a stock
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- Explain how to use the free cash flow valuation model to find the price per share of common equity.What does the capital asset pricing model (CAPM) calculate? a. The expected rate of return on an individual stock with respect to the risk-free rate of return b. The expected rate of return of an individual stock based on its overall risk c. The expected rate of return of an individual stock with respect to its market risk only d. The expected rate of return of an individual stock reflecting its financial risk Clear my choicePlease financial accounting expert need your help
- Capital asset pricing theory asserts that portfolio returns are best explained by:a. Economic factors.b. Specific risk.c. Systematic risk.d. Diversification.The capital asset pricing model expresses the cost of equity as a function of a return on riskless assets, a market premium, and: Select one:a. Unsystematic risk.b. None of these.c. The cost of debt.d. Systematic risk.Which model is typically used to estimate the cost of using external equity capital? Group of answer choices capital asset pricing model rate of return on perpetuity model arbitrage pricing theory model dividend valuation model
- Describe the capital asset pricing model and explain the role of beta as a risk measurement tool.The Capital Asset Pricing Model (CAPM) describes a relationship between the expected return of,,, a)An individual share and its variance risk b)An individual share and its standard deviation risk c)An individual share and its undiversifiable risk d)An individual share and its diversifiable riskThe value of an asset is the present value of the expected returns from the asset during the holding period. An investment will provide a stream of returns during this period, and it is necessary to discount this stream of returns at an appropriate rate to determine the asset’s present value. A dividend valuation model such as the following is frequently used: P = D/ K-g where: P = the current price of Common Stock D = the expected dividend K = the required rate of return on Stock g = the expected constant-growth rate of dividends for Stock a. Identify the three factors that must be estimated for any valuation model and explain why these estimates are more difficult to derive for common stocks than for bonds
- The sum of the expected dividend and the expected capital gains yield is called a. Required rate of return b. expected total return c. expected rate of return d. value of the stock e. realized rate of returnIn the capital asset pricing model, the general risk preferences of investors in the marketplace are reflected by ________. the level of the security market line the slope of the security market line the difference between the beta and the risk-free rate the risk-free rateAccording to the capital asset pricing model, assets with Lower; lower; unsystematic Higher; higher, unsystematic Lower; higher; unsystematic Higher; higher; systematic Higher; lower; systematic betas have expected returns because betas quantify the degree of risk. Please fill in the blank.