The capital asset pricing model describes the relationship between the required return, or the cost of common stock equity capital, and the nonsystematic risk of a firm as measured by the beta coefficient. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The capital asset pricing model is used to calculate the effect of increase in prices of capital assets due to inflation. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
When the constant-growth valuation model is used to find the cost of common stock equity capital, it can easily be adjusted for flotation costs to find the cost of new common stock; the capital asset pricing model (CAPM) does not provide a simple adjustment mechanism. Indicate whether the statement is true or false […]
Date: September 19th, 2020
The cost of new common stock is normally greater than any other long-term financing cost. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Use of the capital asset pricing model (CAPM) in measuring the cost of common stock equity differs from the constant-growth valuation model in that it directly considers the firm’s risk as reflected by beta. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Capital gain is the portion of the sale price that is in excess of the initial purchase price. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Stock purchase warrants are instruments that give their holders ________. A) the obligation to purchase a certain number of shares of the issuer’s common stock at a specified price over a certain period of time B) the right to purchase a certain number of shares of the issuer’s common stock at a specified price over […]
Date: September 19th, 2020
Recaptured depreciation is the portion of the sale price that is in excess of the initial purchase price. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
In case of an existing asset which is depreciable and is used in business and is sold for a price equal to its initial purchase price, the difference between the sales price and its book value is considered as recaptured depreciation and will be taxed as ordinary income. Indicate whether the statement is true or […]
Date: September 19th, 2020
Recaptured depreciation is the portion of the sale price that is below the book value. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
