If the equity cost of capital is less than the dividend growth rate,the share value under the constant- dividend growth model will be positive.

Question

Quizplus · Accepted Answer

If the equity cost of capital is less than the dividend growth rate, it would result in an unsustainable situation where the company is expected to pay more in dividends than it earns. Therefore, the share value under the constant-dividend growth model would not be positive in this scenario.

If the Equity Cost of Capital Is Less Than the Dividend