The dividend growth model:

Select one:

a. is only as reliable as the estimated rate of growth

b. can only be used if historical dividend information is available

c. considers the risk that future dividends may vary from their estimated values.

d. applies only when a firm is currently paying dividends

e. uses beta to measure the systematic risk of a firm

Question

Valentina Randall

Business

23 February, 00:12

The dividend growth model:

Select one:

a. is only as reliable as the estimated rate of growth

b. can only be used if historical dividend information is available

c. considers the risk that future dividends may vary from their estimated values.

d. applies only when a firm is currently paying dividends

e. uses beta to measure the systematic risk of a firm

+2

Answers (1)

Know the Answer?

Elliott Bolton · Answer 1

a. is only as reliable as the estimated rate of growth

Explanation:

Dividend growth model is used to estimate the price of a stock. This price is calculated by summing up the present values of expected future dividends by discounting them at the investors' required return and taking into consideration a constant or non-constant growth rate. One of the disadvantages of using this model is that it is difficult to get an accurate estimate of this growth rate.