According to CAPM, which of the following would increase a company's cost of equity if the...

According to CAPM, which of the following would increase a company's cost of equity if the company had origanlly calculated Ke using: Rf=1.5%, Beta = 1.31, and the market risk premium is 8%?

1- Increasing Beta

2- Increasing Rf

3- Decreasing Rf

4- Increasing the rick on the market

answer options -

a- 1 and 2

b- 1, 2, and 3

c- 2, 3, and 4

d- 1, 3, and 4

Expert Solution

jeff jeffy answered 2 years ago

Considered alone, which of the following would increase a company's current ratio? a. An increase in...

Considered alone, which of the following would increase a company's current ratio? a. An increase in accrued liabilities. b. An increase in accounts receivable. c. An increase in net fixed assets. d. An increase in accounts payable. e. An increase in notes payable.

Diversification can increase the level of systematic risk. True False According to the CAPM, which of...

Diversification can increase the level of systematic risk. True False According to the CAPM, which of the following is NOT related to the expected return on a stock? A. pure time value of money as measured by the risk-free rate B. amount of systematic risk as measured by beta C. the reward for systematic risk as measured by the market risk premium D. amount of risk as measured by the standard deviation If a stock does not pay dividends which...

a) Which ONE of the following statements underpins the rationale behind the CAPM method of estimating the cost of equity?

a) Which ONE of the following statements underpins the rationale behind the CAPM method of estimating the cost of equity?Only unique risk is rewarded.Only market risk is rewarded as unique risk can be diversified away.Only unsystematic risk is rewarded as it cannot be diversified away.Only diversifiable risk is rewarded as it affects total risk.b)Which of the following statements are FALSE.Investors prefer diversified portfolios because they are less risky.Diversification with a large number of securities completely eliminates riskThe risk of a...

Why can the cost of equity be measured by the CAPM?

Other things held constant, which of the following alternatives would increase a company's cash flow for...

Other things held constant, which of the following alternatives would increase a company's cash flow for the current year? a. Increase the days' sales outstanding (DSO) without reducing sales b. Purchase new equipment c. Decrease the accounts payable balance d. Increase the inventory turnover ratio without affecting sales e. Decrease the accrued wages balance ____ 2. You observe that a firm's ROE is above the industry average, but its profit margin and debt ratio are both below the industry average....

According to the CAPM, which of the following is false regarding the market portfolio? All securities...

According to the CAPM, which of the following is false regarding the market portfolio? All securities in the market portfolio are held in proportion to their market values. It includes all risky assets in the world. It is always the minimum-variance portfolio on the efficient frontier. It lies on the efficient frontier. None of the above. Which of the following statements about correlation is least accurate? If the correlation coefficient is 0, a zero-variance portfolio can be constructed. Diversification reduces...

6) Which of the following is a problem when using the CAPM to estimate the cost...

6) Which of the following is a problem when using the CAPM to estimate the cost of capital for equity? A. The risk-free rate of return fluctuates. B. The market return fluctuates. C. The beta fluctuates. D. The beta is calculated using historical data. 7) You are trying to determine the appropriate price to pay for a share of common stock. If you purchase this stock, you plan to hold it for 1 year. At the end of the year...

True or False The CAPM is an approach to determine the cost of international equity capital....

True or False The CAPM is an approach to determine the cost of international equity capital. 17) TRUE or FALSE The MNE can increase its marginal cost of capital by gaining access to markets that are more liquid and/or less segmented than its own. 14) TRUE or FALSE To minimize the cost of external funds, the MNE should choose to minimize debt financing. TRUE or FALSE In theory, the MNE should support lower debt ratios than a purely domestic firm...

Which of the following provides an increase in a company's cash position (source of cash)?

Which of the following provides an increase in a company's cash position (source of cash)? None of the answers is correct Increase in inventory Decrease in accounts payable Increase in fixed assets Decrease in accounts receivables

Company ABC is currently unlevered. It uses CAPM to estimate the cost of common equity, and...

Company ABC is currently unlevered. It uses CAPM to estimate the cost of common equity, and at the time of the analysis the risk-free rate is 5%, the market risk premium is 6% and the company's tax rate is 34%. It estimates that its beta now (which is unlevered because it currently has no debt) is .93 further, over the next two years, the companys Capital budgeting needs and and NI are as follows: YEAR Capital budgeting needs Net Income...

Question