In Contrast to the FCFE Approach, the Dividend Discount Model

question 9

Multiple Choice

In contrast to the FCFE approach, the dividend discount model (DDM) approach values:

• A) cash flows that are available for distribution to stockholders.
• B) the stream of cash flows that stockholders expect to receive through dividend payments.
• C) the stream of cash flows that stockholders expect to receive through bonus issue.
• D) the stream of cash flows that stockholders expect to receive through stock repurchase.

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Definitions:

Time Value

The concept that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.