Dividend growth model approach to computing cost of equity

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Reference no: EM131618164

Which one of the following statements is correct related to the dividend growth model approach to computing the cost of equity?

The rate of growth must exceed the required rate of return.

The rate of return must be adjusted for taxes.

The annual dividend used in the computation must be for Year 1 if you are Time 0’s stock price to compute the return.

The cost of equity is equal to the return on the stock plus the risk-free rate.

The cost of equity is equal to the return on the stock multiplied by the stock's beta.

Reference no: EM131618164

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