The Constant-Growth Dividend Discount Model (DDM) Can Be Used Only

question 46

Multiple Choice

The constant-growth dividend discount model (DDM) can be used only when the ________.

• A) growth rate is less than or equal to the required return
• B) growth rate is greater than or equal to the required return
• C) growth rate is less than the required return
• D) growth rate is greater than the required return

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Definitions:

Lump-Sum Taxes

Taxes that are the same amount for everyone, regardless of the taxpayer’s income level or ability to pay.

Marginal Tax Rates

The percentage of tax applied to the last dollar earned, indicating the fraction of any additional income that will be taken in taxes.

Inflation-Adjusted

An adjective describing the modification of financial figures to reflect changes in the purchasing power of money, allowing for comparison over time.

Income Tax Revenue

The total sum of money collected by the government from individuals or businesses based on earned income and profits.