The Primary Advantage of Using the Dividend Growth Model to Estimate

question 37

Multiple Choice

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 model's applicability to all corporations.
• C) is the model's consideration of risk.
• D) the stability of the computed cost of equity over time.
• E) the simplicity of the model.

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Definitions:

Dispersion Forces

Weak forces resulting from temporary polarization of molecules due to the movement of electrons, also known as London dispersion forces.

Van Der Waals

Weak forces of attraction between molecules, named after Dutch physicist Johannes Diderik van der Waals, significant in the properties of gases and liquids.

Dipole-Dipole Forces

Intermolecular forces between two polar molecules due to the positive and negative poles attracting each other.

Compounds

Substances consisting of two or more different elements chemically bonded together in a fixed ratio.