Question: A) Outline and discuss the potential problems involved in using a dividend growth model to value equity. B) Consider the following information for Trident plc.

A) Outline and discuss the potential problems involved in using a dividend growth model to value equity.

B) Consider the following information for Trident plc.

The current dividend per share is 10p. Shareholders require a return of 10% per annum. The dividend growth rate is assumed to be 25% for years 1-3 and 7% thereafter.

What is Tridents current share price?

C) The Capital Asset Pricing Model (CAPM) has been put forward as an alternative to the Dividend Valuation Model in calculating a companys cost of equity capital. Why might the two models not provide the same estimate in practice?

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