Question
A company's profits and the value of it's assets are generally more sensitive to economic cycles (i.e. very low in recessions but very high during
A company's profits and the value of it's assets are generally more sensitive to economic cycles (i.e. very low in recessions but very high during economic booms) than the average company in the market. According to the CAPM, what is generally true about it's cost of equity all else equal? (A) The cost of equity should be less than the risk-free rate (B) The cost of equity should be higher than the expected return on the market (C) The cost of equity should be lower than the expected return on the debt (D) The cost of equity should be lower than the expected return on the market
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