Method uses for an estimation of cost of equity is classified as___________?
Correct answer: C. Discounted cash flow method
- A. Market cash flow
- B. Future cash flow method
- C. Discounted cash flow method
- D. Present cash flow method
Explanation
The discounted cash flow method estimates the cost of equity by equating the present value of expected future shareholder cash flows with the current share price. The other listed cash-flow labels are not standard cost-of-equity methods.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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