- +1-530-264-8006
- info@tutorsglobe.com

Advantages and disadvantages of capital asset pricing model

Capital Asset Pricing Model:

The Capital Asset Pricing Model (CAPM) is a powerful analytical tool used for calculating the price of common stock. After reflecting on theory and application of the CAPM model and reviewing the prior work on the Constant Dividend Growth Model post a one paragraph response to the following questions.

Question 1: What are the primary advantages and disadvantages of the Capital Asset Pricing Model (CAPM) compared with the Constant Dividend Growth Model for use in pricing common stock?

Question 2: Can either or both of these two models be used to price the stock of Gamma Inc., a non-publicly traded company that does not pay dividends? Explain your answer.

Question 3: Why is it that the financial models for calculating the price of a stock cannot be reliably used to make day to day investment decisions in the stock market?

Now Priced at $25 (50% Discount)

Recommended **(96%)**

18,76,764

Questions

Asked

21,311

Experts

9,67,568

Questions

Answered

Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!

Submit Assignment
## Q : Sufficient cash flow from operations to finance growth

It doesn't have sufficient cash flow from operations to finance its growth, and it is close to violating the maximum debt-to-assets ratio