The constant-growth form of the dividend discount model

Assignment Help Financial Management

Reference no: EM131987203

1. The Constant-Growth form of the dividend discount model (DDM) is a simplified DCF stock approach to equity valuation. It states that the stock price should equal the present value of all expected future dividends under the assumption that a firm _____________.

A. has a 5-year life

B. has an infinite life

C. will vary its dividend growth rate over its life

D. has managers who own shares in the firm

2. One way for managers to make their companies more valuable for investors is to create a sustainable increase the in the firm’s __________.

A. sales revenue

B. free cash flow

C. advertising program

D. weighted average cost of capital

3. The Constant-Growth DDM is valid only when expected dividend growth, g, is less than the required rate of return, R. If dividends are expected to grow forever (to infinity) at a rate faster than R, the value of the stock would be __________.

A. negative

B. zero

C. a very large finite number

D. infinite

Reference no: EM131987203

Questions Cloud

How do you think your co-workers view you in regard : How do you think your co-workers view you in regard to these characteristics? Be honest in your self-assessment.

Comment on its usefulness in a real-world setting : Support your ideas with research (appropriately cited and referenced) and comment on its usefulness in a real-world setting.

What were the artists and writers trying to accomplish : How was it influenced by Dada? What were the artists and writers trying to accomplish? What specific techniques and ideas did they use?

Describe a decision-making process for employees : Determine how the process might be approached differently for each employee to produce the best results. Use scenarios to convey your idea.

The constant-growth form of the dividend discount model : The Constant-Growth form of the dividend discount model (DDM) is a simplified DCF stock approach to equity valuation.

Organizations that fostered involvement : The cultural areas they considered were organizations that fostered involvement, consistency, adaptability, and mission.

Implementing the bsc tool in organization : What measures the could managers take, when implementing the BSC tool in their organization, to ensure they avoid the pitfalls of the practice

Evaluate the relative main advantage of vertical integration : Give your opinion as to whether your chosen company's industry is maturing or declining, based on its evolution history. Justify your answer.

Skills exhibited by an effective manager : Identify your particular areas of strength and discuss opportunities for your own development as a manager.

User Account

All Pages