How Can We Claim That the Dividend Discount Model Works

question 53

Essay

How can we claim that the Dividend Discount Model works when many actual investors may be seeking capital gains and planning to hold their shares for just a few years?

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Definitions:

Opportunity Cost

The value of the next best alternative that is forgone when making a decision.

Hardware Store

A retail business specializing in selling tools, building materials, and supplies for home improvements, repairs, and maintenance projects.

Building Uses

Pertains to the designated purposes or activities for which a building is designed, occupied, or intended to be used.

Economic Profit

The difference between a firm's total revenues and its total costs, including both explicit and implicit costs, representing the additional amount earned by employing resources in their current activity over their next-best alternative.