Which one of the following statements concerning the dividend growth model is correct?

Multiple Choice

• One of the advantages is that it applies to all dividend-paying stocks.
• The estimated cost of equity financing is very dependent upon the assumed rate of growth.
• The estimated cost of equity will be directly affected by changes in the risk-free rate of return.
• The risk level of the use of the funds will be directly considered by the model.
• The main problem with the model is that it is so simplistic.