CAPM, Dividend Growth or APT: Rate of Return Estimate
Which of the three models (dividend growth, CAPM, or APT) is the best one for estimating the required rate of return (or discount rate) of Safeway?
In your paper include discussion of the following issues:
1. Ease of use of these three models
2. Accuracy of each of these three models
3. How realistic the assumptions of each model are
4. Why did you select your model?
Solution Summary
This solution of 284 words discusses the different characteristics of the dividend growth, CAPM or APT model.
... for estimating the required rate of return is the CAPM. ... this model is that it assumes that dividends grow at a ... it is possible to know what dividend the company ...
... low because it assumes a constant growth rate in dividends. ... more general versions of discounted dividend model must ... The accuracy of the CAPM model is moderate. ...
... share with the discounted value of all future dividends in perpetuity ... less accurate than arbitrage pricing theory (APT) and dividend growth models, CAPM's. ...
... of return Concept of Beta For using CAPM for calculating ... is equal to the next dividend value divided by the difference between cost of equity and growth rate. ...
... security retains value based on the potential for future dividends (Under Armour ... Using CAPM calculations, at $84.301 per share, Under. ...dividend should be explored ...
... This is the CAPM result for different risks. ... The dividend growth rate model can be accurate if it possible to get a ... as Apple Inc does not pay dividends, a very ...
... increased. dividends should be explored. ... and. dividend growth models, CAPM's ease of use, and the isolation of Beta assumptions into a. single ...
... compute cost of equity capital and the CAPM for Time ... The Dividend Discount Model uses the present value of the stock, the expected future dividends, and the ...
... COST OF EQUITY CAPITAL AND THE CAPM. ... The Dividend Discount Model uses the present value of the stock, the expected future dividends, and the growth rate. ...
