The Underlying Assumption of the Dividend Growth Model Is That

question 37

Multiple Choice

The underlying assumption of the dividend growth model is that a stock is worth:

• A)the present value of the future income that the stock generates.
• B)the same amount to every investor regardless of his desired rate of return.
• C)an amount computed as the next annual dividend divided by the market rate of return.
• D)an amount computed as the next annual dividend divided by the required rate of return.
• E)the same amount as any other stock that pays the same current dividend and has the same required rate of return.

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Definitions:

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