As a means of determining a ﬁrm's cost of equity ﬁnancing for an investment, a weakness in the
dividend growth model is that the model is highly dependent upon the accuracy of the beta
assigned to the ﬁrm.

Question

Quizplus · Accepted Answer

The dividend growth model is not dependent on the beta of the firm; it relies on the expected dividend growth rate and the current dividend yield.

As a Means of Determining a ﬁRm's Cost of Equity