A Major Difference Between the Dividend Discount Model (DDM)and the Free

question 50

Multiple Choice

A major difference between the dividend discount model (DDM) and the free cash flow to equity model (FCFE) is that the FCFE:

• A)accounts for potential capital gains and the DDM does not.
• B)measures what a firm could pay out in dividends and the DDM measures what is actually paid.
• C)measures both dividend growth and stability and the DDM only measures the dividend growth.
• D)bases its calculations on future value techniques while the DDM uses present value calculations.

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Definitions:

Atomic Mass

The mass of an atom, typically expressed in atomic mass units (amu), representing the total number of protons and neutrons in the nucleus.

Covalent Bonds

A chemical bond formed by the sharing of one or more pairs of electrons between atoms.

Phosphorus

A chemical element with the symbol P and atomic number 15, essential to all living cells and used in the manufacture of fertilizers.

Oxygen

A chemical element with symbol O, essential for cellular respiration in most aerobic organisms.