The Gordon Dividend Discount Model Has a Number of Problems

question 29

Multiple Choice

The Gordon dividend discount model has a number of problems which include:

• A) the required rate of return must be greater than the expected growth rate. If this is not the case, then the model will estimate a negative value for the share price (which is impossible).
• B) if the expected growth rate is really greater than the required rate of return, then the Gordon growth model is not appropriate for valuation.
• C) this model assumes that the fundamentals of the firm will remain constant over time.
• D) all of the above.

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Definitions:

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