What Is the Relationship Between the Growth Rate and the Cost

question 12

Essay

What is the relationship between the growth rate and the cost of equity implied in the dividend-discount model?

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Definitions:

Accounts Receivable

Unsettled payments from clients to a company for goods or services that have been offered but not yet paid for.

Average Collection Period (ACP)

The average amount of time it takes for a business to receive payments owed by its customers.

Revenue Forecast

An estimate of the amount of money a company expects to earn over a specific period in the future.

Sustainable Growth Rate

The maximum rate at which a company can grow without needing to increase financial leverage.