When calculating a company’s cost of common stock, an analyst *uates the following four components: risk free rate, stock’s beta coefficient, rate  of return on the market portfolio, and required rate of return on the company’s stock. Which of the following measurement models is being used?
a. Constant growth.
b. Weighted marginal cost of capital.
c. Capital asset pricing.
d. Overall cost of capital.
Answer:C
Choice “c” is correct.
The requirement is to identify the type of valuation model that is being used.
Answer (c) is correct because the capital asset pricing model is calculated using the risk free interest rate, the stock’s beta coefficient, and the estimated return on the market to calculate the cost of equity.
Answers (a), (b), and (d) are incorrect because the factors are used in the capital asset pricing model.