1. in calculating the cost of common stock equity, the model having the stronger

Question

1. in calculating the cost of common stock equity, the model having the stronger theoretical foundation is the constant growth the gordon model the variable growth the capital asset pricing model 2.The constant growth valuation modelthe Gordon modelis based on the premise that the value of a share of common stock is the sum of the dividends and expected capital appreciation. determined based on an industry standard P/E multiple. determined by using a measure of relative risk called beta. equal to the present value of all expected future dividends.

Explanation / Answer

Hi, Part A: The capital asset pricing model Part B: The sum of the dividends and expected capital appreciation Thanks

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