When Determining the Value of a Share by the Dividend-Based

question 25

Multiple Choice

When determining the value of a share by the Dividend-Based Approach, which of the following provides the best reason for the life time of the business being the relevant timeframe over which to consider the dividend stream?

• A) It is always recommended that shares be held over the long term.
• B) The NPV of the future dividend stream will determine the price of the share whenever it is sold.
• C) The inaccuracies inherent in this method are less of a problem than the inaccuracies inherent in other valuation methods.
• D) It is easy to estimate the lifetime of a corporation based on historical averages.
• E) Individuals planning to hold shares for the short term can adjust the share's value proportionally to the length of time they hold the share.

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