We report the percentage of cfos who always or almost

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Unformatted text preview: — No better alternatives. — CFOs, courts, investment banks, everyone is using it. My mother always said this was a bad-bad reason for doing things. J.R. Graham, C.R. Harvey / Journal of Financial Economics 60 (2001) 187 } 243 203 Fig. 3. Survey evidence on the popularity of di!erent methods of calculat the cost of equity capital. We report the percentage of CFOs who always or almost always use a particular technique. CAPM represents the capital asset pricing model. The survey is based on the responses of 392 CFOs. is determined by `what investors tell us they requirea. CEOs with MBAs are more likely to use the single-factor CAPM or the CAPM with extra risk factors than are non-MBA CEOs, but the di!erence is only signi"cant for the singlefactor CAPM. We also "nd that "rms with low leverage or small management ownership are signi"cantly more likely to use the CAPM. We "nd signi"cant di!erences for private versus public "rms (public more likely to use the CAPM). This is perhaps expected given that the beta of the private "rm could only be calculated via analysis of comparable publicly traded "rms. F...
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