In Applying the Constant Dividend Model with Infinite Horizon to Price

question 96

True/False

In applying the constant dividend model with infinite horizon to price a stock for purchase,we assume the company will pay dividends forever and that we will hold onto our stock forever.

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Definitions:

Fixed Costs

Costs that remain constant regardless of the amount of production or business operations.

Contribution Margin

The difference between sales revenue and variable costs of a product or service, indicating the amount contributed towards covering fixed costs and generating profit.

Financial Break-even Point

The level of revenue necessary for a firm to cover all its operating expenses and financial costs, achieving a net income of zero.

Gross Profit

The financial gain obtained after deducting the cost of goods sold from sales revenue, before subtracting any operating expenses.