The Model Used to Value a Stock That Pays a Dividend

question 108

Multiple Choice

The model used to value a stock that pays a dividend which increases at a constant rate forever is referred to as which one of the following? Assume the growth rate is less than the discount rate.

• A)diminishing valuation growth model
• B)increasing valuation growth model
• C)constant perpetual growth model
• D)irregular growth perpetual model
• E)two-stage growth model

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Definitions:

Net Working Capital

A financial metric that calculates the difference between a company's current assets and its current liabilities.

Management Of Current Assets

The strategy of managing a company's short-term assets such as cash, inventory, and receivables.

Limited Partner

An investor in a partnership who has limited liability to the extent of their investment and does not partake in day-to-day management.

General Partner

An owner of a partnership who has unlimited liability and is responsible for the management of the partnership.