Explain the CAPM approach for computing the cost of equity. Discuss the merits and demerits of the approach. State briefly the assumptions on which the Gordon (valuation) Model for the cost of equity...

Explain the CAPM approach for computing the cost of equity. Discuss the merits and demerits of the approach. State briefly the assumptions on which the Gordon (valuation) Model for the cost of equity is based. What does each component of the equation represent?