The Constant Growth Model Used for Evaluating the Price of a Share

question 79

True/False

The constant growth model used for evaluating the price of a share of common stock may also be used to find the price of perpetual preferred stock or any other perpetuity.

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Definitions:

Voting Shares

Shares of a company that provide the shareholder the right to vote on corporate matters, such as the election of the board of directors.

Open Market

A market where buying and selling of goods and services take place with minimal restrictions or regulations, often referring to the stock market.

Ownership Percentage

The fraction or percentage of a company that is owned by a shareholder or group of shareholders.

Voting Shares

Shares that give the shareholder the right to vote on corporate matters.