The Constant Dividend Growth Model Is

question 34

Multiple Choice

The constant dividend growth model is:

• A) generally used in practice because most stocks have a constant growth rate.
• B) generally used in practice because the historical growth rate of most stocks is constant.
• C) generally not used in practice because most stocks grow at a non constant rate.
• D) generally not used in practice because the constant growth rate is usually higher than the required rate of return.
• E) based on the assumption Dow 30 represents a good estimate of the market index.

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Definitions:

Book Value

The net value of an asset or liability recorded on the balance sheet, calculated as its original cost minus any depreciation, amortization, or impairments.

Acquirer

A company or individual that purchases another company, typically in the context of mergers and acquisitions.

Voting Shares

Shares that give the shareholder voting rights in company decisions, typically one vote per share.

Consolidated Financial Statements

Combined financial reporting documents that present the overall financial status of a parent company and its subsidiaries as a single entity.