Which One of the Following Is an Underlying Assumption of the Dividend

question 22

Multiple Choice

Which one of the following is an underlying assumption of the dividend growth model?

• A)A stock has the same value to every investor.
• B)A stock's value is equal to the discounted present value of the future cash flows which it generates.
• C)A stock's value changes in direct relation to the required return.
• D)Stocks that pay the same annual dividend have equal market values.
• E)The dividend growth rate is inversely related to a stock's market price.

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Definitions:

Financial Condition

Refers to the current state of a company's financial health and stability, often assessed through analyzing balance sheets, income statements, and cash flow statements.

Par Value

The nominal or face value of a security or stock as stated by the issuing company, which might not reflect its market value.

Book Value

The value of an asset according to its balance sheet account balance, which is the cost of the asset minus any depreciation, amortization, or impairment costs made against the asset.