Asked by
Conner Seagraves
on Nov 28, 2024
Verified
Which of the following statements is correct?
A) The constant growth model takes into consideration the capital gains investors expect to earn on a stock.
B) Two firms with the same expected dividend and growth rate must also have the same stock price.
C) It is appropriate to use the constant growth model to estimate stock value even if the growth rate is never expected to become constant.
D) The price of a stock is the present value of all expected future dividends, discounted at the dividend growth rate.
Constant Growth Model
A method to value a stock by assuming that dividends grow at a constant rate indefinitely.
Capital Gains
The profit earned from the sale of a capital asset, such as stocks, bonds, or real estate, where the sale price exceeds the purchase price.
Dividend Growth Rate
The annualized percentage rate of growth of a company's dividend payments.
- Acquire knowledge on the essential principles of the dividend discount model used for stock assessment.
Verified Answer
SD
Learning Objectives
- Acquire knowledge on the essential principles of the dividend discount model used for stock assessment.