In Order for Any Dividend Valuation Model to Reflect a Valid

question 43

Multiple Choice

In order for any dividend valuation model to reflect a valid stock price for a company,

• A)the company must pay dividends.
• B)the dividend growth rate must remain constant.
• C)the required rate of return (discount rate) must remain constant.
• D)More than one of the above is true

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Definitions:

Uncollectible Accounts

Accounts receivable that a company does not expect to collect and thus writes off as a loss.

Direct Write-off Method

An accounting practice where uncollectable debts are written off against income at the time they are deemed non-collectable.

Allowance Method

An accounting technique that estimates uncollectible accounts receivable to record bad debts expense, reflecting more accurate accounts.

Allowance for Doubtful Accounts

A contra-asset account that represents the estimated amount of accounts receivable which may not be collected.