Which of the Following Statements Concerning the Constant-Growth Dividend Valuation

question 114

Multiple Choice

Which of the following statements concerning the constant-growth dividend valuation model is (are) correct?
I.One simple method of estimating the dividend growth rate is to analyze the historical pattern of dividends.
II.The expected total return equals the return from capital gains plus the return from dividends paid.
III.The model is applicable to growth firms with initially high growth rates.
IV.The intrinsic value calculated using this method can change from one investor to another if their risk-return payoffs differ.

• A)I and IV only
• B)II and III only
• C)I, II and IV only
• D)I, II and III only

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Definitions:

Relative Prices

The price of one good or service compared to another, usually indicating how many units of one good you can exchange for a unit of another.

Quinces

A yellow fruit that is similar to a pear in shape and is often used in cooking or making preserves due to its tart flavor.

Kumquats

Small, edible fruit resembling oranges with a sweet rind and tart flesh, often eaten whole or used in culinary dishes.

Bushel

A unit of volume that is used for measuring quantities of agricultural produce, such as grains.