Oracle 1Z0-1033-20 Q&A - in .pdf

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Which of the following statements is correct?
A. The DCF (Discounted Cash Flow) model is preferred over other models to estimate the cost of equity because of the ease with which a firm's growth rate is obtained.
B. The bond-yield-plus-risk-premium approach to estimating the cost of equity is not always accurate but its advantages are that it is a standardized and objective model.
C. Depreciation-generated funds are an additional source of capital and, in fact, represent the largest single source of funds for some firms.
D. Although some methods of estimating the cost of capital encounter severe difficulties, the CAPM (Capital Asset Pricing Model) is a simple and reliable model that provides great accuracy and consistency in estimating the cost of capital.
Answer: C
Since depreciation is a significant non-cash expense, it is added back to net income when calculating cash flow.





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