Which model is commonly used in financial planning for investment evaluation?

The Capital Asset Pricing Model (CAPM) is widely used in financial planning for investment evaluation because it provides a framework to determine the expected return on an investment based on its risk relative to the market. CAPM considers the asset's sensitivity to market movements (beta), the risk-free rate, and the expected return of the market itself. This model helps investors make informed decisions by quantifying the relationship between systematic risk and expected return, allowing for a more strategic allocation of capital based on individual risk tolerance and market conditions.

The other options serve different purposes in finance but are less commonly applied in the context of general investment evaluation. The Efficient Market Hypothesis suggests that asset prices reflect all available information, but it does not directly evaluate investments. The Black-Scholes Model is primarily used for pricing options and derivatives rather than evaluating a broader range of investment opportunities. The Dividend Discount Model focuses specifically on valuing a stock based on its expected dividends, making it a more niche approach rather than a comprehensive evaluation model like CAPM.