How do I know to use DVM or DGM to calculate cost of equity in exam?
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Cost of capital
4mo ago#1The DGM calculates the cost of equity based on the current market price of the share, the current dividend, and the expected future dividend growth rate.
The DVM focuses on the present value of future dividends, which can be used to assess the value of a stock.
If the question provides information about future dividend growth rates and current dividends, DGM may be more appropriate.
If the question emphasises the present value of dividends without specific growth rates, DVM might be the better choice.
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