Which of the following statements is correct? a. the discounted cash flow method of estimating the cost of equity cannot be used unless the growth rate, g, is expected to be constant forever. b. if the calculated beta underestimates the firm's true investment risk—i. e., if the forward-looking beta that investors think exists exceeds the historical beta—then the capm method based on the historical beta will produce an estimate of rs and thus wacc that is too high. c. beta measures market risk, which is, theoretically, the most relevant risk measure for a publicly-owned firm that seeks to maximize its intrinsic value. this is true even if not all of the firm's stockholders are well diversified. d. an advantage shared by both the dcf and capm methods when they are used to estimate the cost of equity is that they are both "objective" as opposed to "subjective," hence little or no judgment is required. e. the specific risk premium used in the capm is the same as the risk premium used in the bond-yield-plus-risk-premium approach.

Costco wholesale corporation operates membership warehouses selling food, appliances, consumer electronics, apparel and other household goods at 471 locations across the u.s. as well as in canada, mexico and puerto rico. as of its fiscal year-end 2005, costco had approximately 21.2 million members. selected fiscal-year information from the company's balance sheets follows. ($ millions). selected balance sheet data 2005 2004 merchandise inventories $4,015 $3,644 deferred membership income (liability) 501 454 (a) during fiscal 2005, costco collected $1,120 cash for membership fees. use the financial statement effectstemplate to record the cash collected for membership fees. (b) in 2005, costco recorded $46,347 million in merchandise costs (that is, cost of goods sold). record thistransaction in the financial statement effects template. (c) determine the value of merchandise that costco purchased during fiscal-year 2005. use the financial statementeffects template to record these merchandise purchases. assume all of costco's purchases are on credit.