THE CAPITAL ASSET PRICING MODEL

The Capital Asset Pricing Model

The Capital Asset Pricing Model

Dividend Growth Model

The basic assumption in the model of growth of dividends is that dividends grow at a steady rate. This rate of growth will not change throughout the period evaluated. Consequently, this may bias the result for companies experiencing rapid growth. The dividend growth model is best suited for stable businesses that fit the model.

In addition, since the rate of dividend growth is expected to remain unchanged indefinitely, other measures of performance within the company are also required to maintain the same growth rate.

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