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hello Sir
one of the drawback of DGM is that it ignores the effect of taxation.how?Where on earth did you read that?
It does certainly ignore the effect of personal tax (and capital gains tax) on the investor. Higher rate tax payers would end up receiving less (net of tax) than the dividend actually paid. This would only really be of relevance if a substantial number of the investors were paying at higher rates.
(Even then, it is not a drawback of the model at all – it simply creates a problem as to what numbers we use in the model)
However, we always ignore personal taxes in Paper F9!
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