An advantage to using the SML approach for calculating the cost of equity it that this approach applies only to companies that pay dividends

Question

Quizplus · Accepted Answer

The SML (Security Market Line) approach, part of the Capital Asset Pricing Model (CAPM), calculates the cost of equity based on systematic risk (beta) and does not rely on a company paying dividends, making it applicable to all companies regardless of their dividend policy.

An Advantage to Using the SML Approach for Calculating the Cost