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:

Reliable Methods

Techniques or processes that consistently produce accurate, dependable results.

New Business Ideas

Innovative concepts or plans intended for implementation to start a business or offer new products or services.

Routine

A sequence of actions regularly followed; a fixed program or habitual set of activities.

Familiar Experiences

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