The Dividend Discount Model Should Not Be Used to Value

question 88

True/False

The dividend discount model should not be used to value stocks in which the dividend does not grow.

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Definitions:

Marginal Cost

The extra financial outlay needed for manufacturing another unit of a product or service.

Marginal Product

The boost in production one can expect by adding an extra unit of labor or capital, ceteris paribus.

Wage Rate

The amount of compensation workers receive in exchange for their labor, typically expressed per hour or per unit of work.

Capital

Financial assets or the financial value of assets, such as funds held in deposit accounts as well as the physical factors of production.