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The Capital Asset Pricing Model (CAPM) is an important method for estimating the expected investment rate...

The Capital Asset Pricing Model (CAPM) is an important method for estimating the expected investment rate of return on an asset. That investment rate of return can be used as the discount rate for calculating the present value of a firm's forecasted future cash flows in order to estimate the value of the company. The CAPM equation includes which of the following elements...

a. the Risk Free Rate

b. the Market Risk Premium

c. the stock's Beta coefficient (sensitivity to market fluctuations - relative to average risk of a market portfolio)

d. the minimum IRR accepted by management

e. All of the above

f. All of the above except d.

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Answer #1

CAPM equation:  

Therefore answer is e. All of the above

Note, E(R) is IRR

Please do rate me and mention doubts, if any, in the comments section.

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