Question:
1. Look back to the top-right panel . What proportion of Amazon's returns was explained by market movements? What proportion of risk was diversifiable? How does the diversifiable risk show up in the plot? What is the range of possible errors in the estimated beta?
2. Define the following terms:
a. Cost of debt
b. Cost of equity
c. After-tax WACC
d. Equity beta
e. Asset beta
f. Pure-play comparable
g. Certainty equivalent