The Dividend Discount Model (DDM)can Only Be Used to Value

question 58

True/False

The dividend discount model (DDM)can only be used to value a company's stock if it is expected that the company will pay a dividend that grows at a constant rate in the future.

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Definitions:

Pure Competition

Also known as perfect competition, it is a market structure characterized by a large number of buyers and sellers, homogenous products, and free entry and exit from the market.

Monopolistic Competition

A market structure featuring many firms selling similar but not identical products, allowing for some degree of market power and price differentiation among competitors.

Monopolistically Competitive

An economic scenario in which numerous companies offer products that are alike but not exactly the same, facilitating rivalry through distinctions in their products.

Excess Capacity

A situation in which a firm or industry has more resources available, particularly production capabilities, than is being utilized due to insufficient demand.