QUESTION 37 Which of the following statements is true concerning companies that do not pay dividends? a. The cost of equity capital can be estimated using the Capital Asset Pricing Model. b. The cost of equity capital is equal to the growth short-term rate of earnings per share. c. The dividend capitalization model can be used to determine an accurate cost of equity capital. d. None of these are correct

QUESTION 37 Which of the following statements is true concerning companies that do not pay dividends? a. The cost of equity capital can be estimated using the Capital Asset Pricing Model. b. The cost of equity capital is equal to the growth short-term rate of earnings per share. c. The dividend capitalization model can be used to determine an accurate cost of equity capital. d. None of these are correct

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 3Q

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QUESTION 37

Which of the following statements is true concerning companies that do not pay dividends?

	a.	The cost of equity capital can be estimated using the Capital Asset Pricing Model.
	b.	The cost of equity capital is equal to the growth short-term rate of earnings per share.
	c.	The dividend capitalization model can be used to determine an accurate cost of equity capital.
	d.	None of these are correct

Definition Definition Model that illustrates the correlation between the expected return and risk of capital investment in stock. According to this model, the expected rate of return on equity is equal to the risk-free return added to a risk premium, which is based on the stock beta.

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