The Variable- Growth Dividend Valuation Model

question 19

Multiple Choice

The variable- growth dividend valuation model

• A) assumes the rate of dividend growth will vary indefinitely.
• B) is valuable because it accounts for the general growth patterns of most companies.
• C) develops the value of a share using the future value of dividends minus a rate of capital gain growth.
• D) is invalid if at any point in time the growth rate exceeds the required rate of return.

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Definitions:

Bond Indenture

A legal contract between a bond issuer and bondholders detailing the characteristics of the bond, such as its maturity date, coupon rate, and payment schedule.

Bond Issuer

An entity, such as a corporation or government, that creates and sells bonds to finance its projects and operations.

Fiscal Year

A one-year period used for financial reporting and budgeting purposes, which does not necessarily align with the calendar year.

Semiannual Interest

Interest that's computed and disbursed semi-annually, commonly associated with bonds and loans.