Which of the Following Is a Disadvantage of the Dividend

question 220

Multiple Choice

Which of the following is a disadvantage of the dividend growth model when estimating the cost of equity?

• A) It applies only to firms whose dividend growth rate fluctuates widely.
• B) It only applies to companies which are not currently paying dividends.
• C) It explicitly considers risk.
• D) The estimated cost of equity is highly sensitive to the estimated growth rate.
• E) It does not use discounted cash flow techniques.

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Definitions:

Seven Ps

An extended marketing mix model that includes Product, Price, Place, Promotion, People, Process, and Physical evidence as its components.

Profitability

The ability of a company to generate earnings compared to its expenses and other relevant costs incurred during a specific period.

Seven Ps

An extension of the marketing mix that includes Product, Price, Place, Promotion, People, Process, and Physical Evidence, used to review and define key issues that affect the marketing of its products and services.

Marketing Mix

The set of actionable areas that a company uses to promote its brand or product in the market, traditionally identified as the 4Ps: Product, Price, Place, and Promotion.