The ________ is a popular and somewhat intuitive technique for estimating the required return on common equity.

Question

Quizplus · Accepted Answer

The dividend model, also known as the dividend discount model, is a widely used method for determining the required rate of return on a company's common equity. This model relies on the assumption that the stock's intrinsic value is equal to the present value of all its future dividends. It is considered intuitive because higher dividends indicate a higher cash return to the investor, which thus influences the required return on equity. The yield to maturity model is used to calculate the rate of return on a fixed-income investment such as bonds. The future value model is used to determine the value of an investment at a future date based on a set interest rate. The interest model is too broad and vague to be a correct option.

The ________ Is a Popular and Somewhat Intuitive Technique for Estimating