The primary advantage of using the dividend growth model to estimate a company's cost of equity is:
A) the ability to apply either current or future tax rates.
B) the model's applicability to all corporations.
C) is the model's consideration of risk.
D) the stability of the computed cost of equity over time.
E) the simplicity of the model.

Question

Quizplus · Accepted Answer

The dividend growth model is favored for its simplicity, as it requires only the dividend per share, the growth rate of the dividend, and the current stock price to estimate a company's cost of equity.

The Primary Advantage of Using the Dividend Growth Model to Estimate