It Is Possible to Ignore Cash Dividends That Occur Very

question 102

Multiple Choice

It is possible to ignore cash dividends that occur very far into the future when using a dividend discount model because those dividends:

• A) will most likely be paid to a different investor.
• B) will most likely not be paid.
• C) have an insignificant present value.
• D) have a minimal, if any, potential rate of growth.

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Definitions:

Operating Income

A company's profit after subtracting operating expenses, such as wages and cost of goods sold, but before deducting interest and taxes.

Divisional Operating Income

The profit earned by a specific division or segment of a company after deducting all direct and indirect expenses but before interest and taxes.

Top Management

The highest tier of executives and decision-makers in an organization, responsible for overall strategy and policies.

Cost Price Approach

An approach to transfer pricing that uses cost as the basis for setting the transfer price.