What are the TWO primary advantages of using CAPM over DDM? It adjusts for risks It does not explicitly consider risk Applicable to companies that pay steady dividends Applicable to companies that pay no dividends

What are the TWO primary advantages of using CAPM over DDM? It adjusts for risks It does not explicitly consider risk Applicable to companies that pay steady dividends Applicable to companies that pay no dividends

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter13: Auditing Debt, Equity, And Long-term Liabilities Requiring Management Estimates

Section: Chapter Questions

Problem 10CYBK

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Question

What are the TWO primary advantages of using CAPM over DDM?

It adjusts for risks

It does not explicitly consider risk

Applicable to companies that pay steady dividends

Applicable to companies that pay no dividends

Definition Definition Model that illustrates the correlation between the expected return and risk of capital investment in stock. According to this model, the expected rate of return on equity is equal to the risk-free return added to a risk premium, which is based on the stock beta.

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