Which of the Following Statements Is FALSE of the Dividend-Discount

question 16

Multiple Choice

Which of the following statements is FALSE of the dividend-discount model?

• A) We cannot use the dividend-discount model to value the stock of a firm with rapid or changing growth.
• B) As firms mature, their growth slows to rates more typical of established companies.
• C) The dividend-discount model values the stock based on a forecast of the future dividends paid to shareholders.
• D) The simplest forecast for the firm's future dividends states that they will grow at a constant rate, i.e., forever.

---

Definitions:

Minimum Wage

The lowest legal hourly pay rate that employers can pay to workers.

Recession

A phase of brief economic downturn marked by a decrease in business and manufacturing activities, typically recognized when there's a drop in Gross Domestic Product (GDP) for two consecutive quarters.

Price Ceiling

A government-imposed limit on how high a price can be charged on a product, intended to protect consumers from high prices, but can lead to shortages.

Shortage/Surplus

A market condition where the quantity demanded exceeds the quantity supplied (shortage) or the quantity supplied exceeds the quantity demanded (surplus).