It Is Possible to Ignore Cash Dividends That Occur Far

question 107

Multiple Choice

It is possible to ignore cash dividends that occur far into the future when using a dividend discount model because those dividends:

• A) will most likely be paid to a different investor.
• B) will most likely not be paid.
• C) have an insignificant present value.
• D)have a minimal, if any, potential rate of growth.

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Definitions:

Economic Efficiency

A situation where all resources are optimally allocated to serve each individual or entity in the best way while minimizing waste and inefficiency.

Private-Sector Risk

The risk associated with the non-governmental sector, encompassing uncertainties in business environments, market dynamics, and financial operations.

Invisible Hand

A term coined by Adam Smith to describe the self-regulating behavior of the marketplace where individuals pursuing their own interest often benefit society as a whole.

Government Resource Allocation

The process by which government entities decide how to distribute resources and funds between various projects or sectors.