Question

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 simplicity of the model. C) the model's applicability to all co

Answer 1

Answer:

B

Explanation:

The dividend growth model is a method of determining the value of a company using its dividend.

Forms of the dividend growth model include

1. The Gordon dividend growth model
2. The 2-stage dividend growth model
3. The 3-stage dividend growth model
4. The H-model

The advantages of the dividend growth model

• it is easy to calculate

disadvantages of the dividend growth model

• It is not appropriate when the investor wants to take a control perspective
• It cannot be used for a firm that doesn't pay dividends