Both the capital asset pricing model and the dividend discount model can be used to determine the cost of equity financing.

Question

Quizplus · Accepted Answer

Both the capital asset pricing model and the dividend discount model are commonly used methods to estimate the cost of equity financing for companies. The capital asset pricing model is based on the idea that the expected return on a stock is equal to the risk-free rate plus a premium for the stock's unique risk. The dividend discount model, on the other hand, is based on the premise that the stock's current price is the sum of discounted future dividend payments. Both models can be useful in estimating the cost of equity financing for companies.

Both the Capital Asset Pricing Model and the Dividend Discount