Which of the following best describes the constant-growth dividend discount model? Select one: a. It is the formula for the present value of a growing annuity b. It is the formula for the present value of a growing annuity c. It is the formula for the present value of a growing perpetuity

Which of the following best describes the constant-growth dividend discount model? Select one: a. It is the formula for the present value of a growing annuity b. It is the formula for the present value of a growing annuity c. It is the formula for the present value of a growing perpetuity

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 11QTD

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Question

Which of the following best describes the constant-growth dividend discount model?

Select one:

a. It is the formula for the present value of a growing annuity

b. It is the formula for the present value of a growing annuity

c. It is the formula for the present value of a growing perpetuity

Definition Definition Quantifiable approach used to anticipate the stock price of a company by discounting all of its future dividend payments. According to this model, the present value of the stock is worth the sum of discounted future dividend payments and the intrinsic value of the stock.

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