cost of capital.docx - 2 Cost of Capital Basics Saturday March 9 2019 2:29 PM Which of the following is not a problem of the capital asset pricing

cost of capital.docx - 2 Cost of Capital Basics Saturday...

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2: Cost of Capital Basics Saturday, March 9, 2019 2:29 PM Which of the following is not a problem of the capital asset pricing model (CAPM)? o It assumes that the risk-free rate is fixed. The capital asset pricing model (CAPM) describes the relationship between __________ and __________. o risk; the expected return As a firm secures more debt, the default premium will ________. o Increase A firm with a higher beta has __________ risk. o Higher Which of the following is the least practical proxy for the return on the market? o Industry group for the subject firm By ensuring that a firm operates under the minimum cost of capital, you can ensure that the firm value is ________. o Maximized Given a market return of 10% and a risk-free rate of 3%, what is the expected return of Firm X with a beta of 1.2? o 11.4% Given a market return of 12% and a risk-free rate of 3%, what is the expected return of Firm X with a beta of 0.75?
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