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:

Dividends Per Share

The amount of dividend that a company pays out to each shareholder, expressed on a per share basis.

Common Stock

A type of security that represents ownership in a corporation, entitling the holder to vote on corporate matters.

Par Value

The face value of a bond or stock as stated by the issuing company.

Cash Dividend

A disbursement by a company to its stockholders, typically coming from earnings.