The Dividend Growth Model

question 24

Multiple Choice

The dividend growth model:

• 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 company is currently paying dividends.
• E) is based solely on historical dividend information.

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Definitions:

Total Cost

The sum of all costs associated with producing or acquiring an item or service, including direct and indirect expenses.

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue contributes to fixed costs and profit.

Sales Volume

The quantity of products or services sold by a business within a specific period.

Contribution Margin

The difference between sales revenue and variable costs, representing the portion of sales revenue that contributes to covering fixed costs and generating profit.