Which one of the following statements is correct related to the dividend growth model approach to computing the cost of equity?
A) The annual dividend used in the computation must be for year one if you are using today's stock price to compute the return.
B) The rate of growth must exceed the required rate of return.
C) The cost of equity is equal to the return on the stock plus the risk-free rate.
D) The cost of equity is equal to the return on the stock multiplied by the stock's beta.
E) The rate of return must be adjusted for taxes.
Correct Answer:
Verified
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