Which of the Following Statements Best Describes the Concept Used

question 3

Multiple Choice

Which of the following statements best describes the concept used to value shares?

• A)The value of an infinite stream of dividends discounted by the current short-term interest rate assuming a company has an infinite life.
• B)Market price can be expressed as the present value of an infinite stream of dividends.
• C)The present value of the dividend stream and expected capital gain must be calculated separately and then added together.
• D)Market price can be expressed as the present value of an infinite stream of dividends assuming a company has an infinite life.

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Definitions:

Year 2

Typically refers to the second year in a given context, such as the second year of a company's operations, a multi-year study, or an investment timeline.

Equity Multiplier

A financial ratio that measures a company's leverage, calculated as total assets divided by total equity.

Year 2

The second year in a given time frame or series, often referring to fiscal or calendar years.

Operating Cycle

The average period of time it takes for a company to purchase inventory, sell products, and collect cash from customers.