Which One of the Following Is Correct Concerning the Two-Stage

question 95

Multiple Choice

Which one of the following is correct concerning the two-stage dividend growth model?

• A) The discount rate is based on the coupon rate a firm pays on its outstanding bonds.
• B) The first growth rate must be higher than the second growth rate.
• C) The time value of money is ignored.
• D) The discount rate ignores the risks associated with an individual firm.
• E) The discount rate considers the risk-free rate of return.

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