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CFAI Reading 44 Q 16.

How did they determine what factors were similar? How did they determine low risk, fast growth?
It looks to me like 6% isn’t all that fast and increasing leverage leads to higher risk…any ideas? The answer doesn’t really explain, it just states the answer….

The answer compares Powell’s assumptions to the table. In the sentence right above the table it states he assumes fast growth and moderate risk, which matches both Firms 2 and 3. Firm 3 is selected since the market conditions were normal.

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Ahhh…must’ve missed it…

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