When Valuing Stock with the Dividend Discount Model,the Present Value

question 63

Multiple Choice

When valuing stock with the dividend discount model,the present value of future dividends will:

• A) change depending on the time horizon selected.
• B) remain constant regardless of the time horizon selected.
• C) remain constant regardless of the rate of growth.
• D) always equal the present value of the terminal price.

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Definitions:

Selling Price

The amount a buyer pays to purchase a product or service.

Automotive Wrecking Yard

A business specializing in dismantling wrecked or decommissioned vehicles for the purpose of selling their parts.

Chain Hoist

A device used for lifting heavy loads by means of a chain, operated manually or electrically.

Markup Percent

The ratio by which the cost of a product is increased to arrive at its selling price, expressed as a percentage of the cost.