The dividend growth model: Group of answer choices Can be used to value only dividend-paying stocks...

The dividend growth model:

Group of answer choices

Can be used to value only dividend-paying stocks

Requires the growth rate to be higher than the required return

Assumes dividends increase at a decreasing rate

Cannot be used to value constant dividend stocks.

Expert Solution

The correct answer is Can be used to value only dividend-paying stocks.

According to the Dividend discount model, the share price is calculated by calculating present value of all the dividends that the stock is going to generate, If the dividend is zero, then the stock value can't be calculated.

Share price = Dividend for next period / (Required return - Growth rate)

jeff jeffy answered 2 years ago

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