Infinite Growth Is a Problem with the Dividend Discount Model

question 26

Multiple Choice

Infinite growth is a problem with the dividend discount model because:

• A)The expected stream of dividends is infinite
• B)At reasonably high discount rates,such as 12 percent,dividends received in the distant future (40 or 50 years from now)are worth very little today
• C)Dividend growth rates eventually become very small
• D)The statement is incorrect - infinite growth is not a problem with the dividend discount model because at reasonably high discount rates,such as 12 percent,dividends received in the distant future are worth very little today

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Definitions:

United Nations Convention

An international treaty agreed upon by member states of the United Nations, aimed at setting out specific legal standards and norms.

Article 2(A)

A specific portion of the UCC that deals with leases of personal property.

Lease Contracts

Legal documents outlining the terms under which one party agrees to rent property owned by another party, specifying duration, payment schedules, and other conditions.

UCC

An all-encompassing series of legal guidelines for managing commercial transactions in the United States is provided by the Uniform Commercial Code.