The annual growth of Omega Inc's operations fluctuates substantially. As a result, using the dividend discount model (DDM) to estimate Omega's cost of retained earnings, rs, is difficult because:
A. the stock's dividend yield is extremely difficult to estimate.
B. its growth rate (g) is not stable, which makes it difficult to estimate.
C. the market price of its common stock is very volatile.
D. the firm's growth rate might be negative for an extended period of time.
E. its net income is difficult to compute.
Answer: B
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