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

question 115

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 growth rate.
• D) always equal the present value of the terminal price.

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Definitions:

Actual Hours

The total time spent on a specific task or job by workers, typically measured in hours.

Variable Overhead Efficiency Variance

The difference between the standard cost of variable overhead allocated to production and the actual variable overhead incurred, based on the efficient use of the allocation base, such as labor-hours.

Standard Activity

A benchmark level of activity or performance against which actual outcomes can be measured.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead to products or job orders, calculated before the period begins based on expected costs and activity levels.