According to the Dividend Discount Model, the Current Value of a Stock

question 138

Multiple Choice

According to the dividend discount model, the current value of a stock is equal to the:

• A)Present value of all expected future dividends
• B)Sum of all future expected dividends
• C)Next expected dividend, discounted to the present
• D)Discounted value of all dividends growing at a constant rate

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Definitions:

OCF

Operating Cash Flow, which is the cash generated from normal business operations, indicating a company's ability to generate sufficient positive cash flow to maintain and grow its operations.

Depreciation

Depreciation is the accounting process of allocating the cost of a tangible asset over its useful life, reflecting the decrease in value over time.

Book Value

The net value of a company's assets, subtracting its liabilities, as recorded on the balance sheet.

Liquid Assets

Assets that can be quickly converted into cash without significant loss of value, such as stocks or government bonds.