When Valuing Stock with the Dividend Discount Model, the Present

question 16

Multiple Choice

When valuing stock with the dividend discount model, the present value of future dividends will:

• A)change depending upon the time horizon selected.
• B)remain constant regardless of the time horizon selected.
• C)remain constant regardless of growth rate.
• D)always equal the present value of the terminal price.

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Definitions:

Beers

An alcoholic beverage typically made from water, malted barley, hops, and yeast.

Day

A period of 24 hours as a unit of time, representing the time taken by the Earth to complete one rotation with respect to the sun.

Utility

Refers to the total satisfaction received from consuming a good or service.

Consuming

The act of using goods and services to satisfy needs or wants.