In the Dividend Discount Model, All of the Following Factors

question 48

Multiple Choice

In the dividend discount model, all of the following factors influence an investor's required rate of return EXCEPT

• A) the real risk free rate.
• B) the risk premium for stocks.
• C) the expected rate of inflation.
• D) the return on assets.

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Definitions:

Stock Dividend

A dividend payment made in the form of additional shares rather than cash, increasing the number of shares owned by shareholders.

Retained Earnings

Retained earnings are the portion of a company's profits that are kept or retained rather than distributed to shareholders as dividends, often used for reinvestment in the business or to pay down debt.

Cumulative Preferred Stock

A type of preferred stock where dividends accrue and must be paid out before dividends can be distributed to common stockholders.

Par Common Stock

The nominal or face value assigned to a share of common stock, which has relevance in corporate accounting.