Capital asset pricing model approach to equity valuation

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Reference no: EM131592503

The capital asset pricing model approach to equity valuation:

Is dependent upon the unsystematic risk of a security.

Assumes the reward-to-risk ratio increases as beta increases.

Can only be applied to dividend-paying firms.

Assumes a firm’s future risks will be higher than its current risks.

Assumes the reward-to-risk ratio is constant.

Reference no: EM131592503

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